Europa-Kommissionen - Repræsentation i Danmark
Europa-Kommissionen - Repræsentation i Danmark
05/05/2021 | Press release | Distributed by Public on 05/05/2021 05:29
Spørgsmål og svar: forslag om ny forordning for at imødegå konkurrenceforvridning på det indre marked på grund af udenlandske subsidier
INDEX
Content of the Proposed Regulation
CONTEXT
What is the aim of the proposed Regulation? What issue does it aim to address?
The EU relies on a strong, open and competitive Single Market for its prosperity and resilience.
EU competition, public procurement and trade defence instruments play an important role in ensuring fair conditions for companies in the Single Market.
However, the existing tools cannot be applied to foreign subsidies which provide their recipients with an unfair advantage when acquiring companies active in the EU, participating in public procurements in the EU or making other investment decisions in the EU, leaving a 'regulatory gap'.
In this respect:
- EU antitrust rules and EU merger control rules do not enable the Commission to specifically take into account whether a company may have benefited from distortive foreign subsidies.
- EU State aid rules apply only to financial contributions granted by EU Member States. In contrast, subsidies granted by non-EU governments fall outside EU State aid control, even if they have effects on Single Market.
- WTO subsidy rules and EU trade defence instruments apply to the import of subsidised goods, but do not apply when foreign subsidies support investments, acquisitions or bids in procurement procedures, or when services are concerned.
- The Foreign Direct Investment (FDI) Regulation aims at tackling threats posed by foreign takeovers and investments to Member States' security and public order.
- The existing EU Public Procurement framework does not specifically address distortions to the EU procurement markets caused by foreign subsidies.
The Regulation aims to address this regulatory gap.
SCOPE OF THE PROPOSAL
Does the proposed Regulation intend to protect specific sectors or industries?
The aim of the proposed Regulation is to ensure a level playing field in the Single Market and therefore it applies equally to all sectors of the economy.
Nevertheless, the proposed Regulation sets out the possibility for the Commission to conduct general market investigations into specific sectors or types of economic activity to identify possible distortions and practices that are specific to that sector or activity.
Does the Regulation target any specific country?
No, the proposed Regulation does not target any particular country. It will apply equally to subsidies granted by all non-EU countries that have a distortive effect on the Single Market.
Does the proposed Regulation cover services?
The proposed Regulation covers foreign subsidies to undertakings engaging in an economic activity in the EU. Providing services on the Single Market is therefore covered by the proposed Regulation.
CONTENT OF THE PROPOSED REGULATION
How will the new instrument work?
The Commission will have the power to investigate financial contributions granted by non-EU authorities to companies active in the EU. If the Commission identifies distortive foreign subsidies, it may remedy their distortive effects, as relevant.
In this context, the Regulation proposes the introduction of three tools; two notification-based procedures and a general market investigation power. More specifically:
- A notification-based tool to investigate concentrations involving a financial contribution by a non-EU government, where the EU turnover of the company to be acquired (or of at least one of the merging parties) is €500 million or more and the foreign financial contribution is at least €50 million;
- A notification-based tool to investigate bids in public procurements involving a financial contribution by a non-EU government, where the estimated value of the procurement is €250 million or more; and
- A tool to investigate all other market situations and smaller concentrations and public procurement procedures, which the Commission can start on its own initiative (ex-officio) and may request ad-hoc notifications.
With respect to the two notification-based tools, the acquirer or bidder will have to notify ex-ante any financial contribution received from a non-EU government in relation to concentrations or public procurements meeting the thresholds. Pending the Commission's review, the concentration in question cannot be completed and an investigated bidder cannot be awarded the contract (standstill obligation). Binding deadlines are laid down for the Commission's decision in such cases.
Under the proposed Regulation, where a company does not comply with the obligation to notify a subsidised concentration or a financial contribution in procurements, the Commission may impose fines and review the transaction as if it had been notified.
The general market investigation tool will enable the Commission to investigate other types of market situations, such as greenfield investments or concentrations and procurements below the thresholds, when it suspects that a foreign subsidy may be involved. In these instances, the Commission will be able to start investigations on its own initiative (ex-officio) and may request ad-hoc notifications. In this case, the standstill obligation will also apply.
What is the definition of 'foreign subsidy' for the purposes the proposed Regulation?
The definition of 'foreign subsidy' is similar to that of State aid under EU State aid rules.
'Foreign subsidy' refers to any financial contribution originating directly or indirectly from the government of a non-EU country that benefits a company engaging in an economic activity in the EU, and which is 'selective', i.e. limited to an individual company or industry or to several companies or industries.
Foreign subsidies may take the form, for example, of zero-interest loans and other below-cost financing, unlimited guarantees, compensations, export financing that is not in line with the OECD Arrangement on officially supported export credits, preferential tax treatment, tax credits, or direct grants.
How does this approach differ from the White Paper (with the three 'Modules')?
The approach presented in the White Paper and the proposal adopted today are broadly similar.
The proposed Regulation maintains the overall structure of the White Paper, but refines the two notification-based tools for concentrations and public procurement to target the most important cases while preserving the flexibility of the ex-officio review.
The proposed targeted approach strikes the balance between having an effective tool and limiting the administrative burden for the companies and the Commission.
What procedure does the proposed Regulation set out for the Commission's assessment?
The procedure to investigate foreign subsidies will consist of a preliminary review and, if there are indications of the existence of a subsidy, an in-depth investigation.
For concentrations, the Regulation provides for 25 working days for a preliminary review and 90 working days for an in-depth investigation (in line with the time limits set out in the EU Merger Regulation). For public procurement, the time limits are set at 60 and 200 days respectively.
How will the assessment be structured?
The Commission will first assess whether a financial contribution by a non-EU government constitutes a foreign subsidy within the meaning of the Regulation and, second, whether it distorts the Single Market.
The Regulation proposes a number of categories and indicators to assess whether foreign subsidies are distortive.
- The categories of subsidies which are most likely to be distortive include, among others, unlimited guarantees, subsidies to an ailing company without restructuring plan and subsidies directly facilitating an acquisition or subsidies facilitating the submission of an unduly advantageous tender. Such categories build on the Commission's State aid practice.
- In all other cases, the Commission will consider certain indicators, such as, among others, the amount, nature and purpose of the subsidy as well as the situation of the company and the market concerned, to establish whether there is a distortion.
If the Commission establishes that a foreign subsidy exists and that it is distortive, it will, where warranted, consider the possible positive effects of the foreign subsidy and balance these effects with the distortion.
When the negative effects outweigh the positive effects, the Commission would have the power to impose redressive measures or accept commitments from the companies concerned that remedy the distortion. The Commission will take the outcome of the balancing into account in order to determine the appropriate redressive measures or commitments.
What type of redressive measures and commitments does the proposed Regulation provide for?
The proposed Regulation includes a range of structural and behavioural remedies that can be imposed by the Commission and/or proposed by the company concerned to remedy the distortion, such as the repayment of the foreign subsidy, the divestment of certain assets, the reduction of capacity or market presence, giving access to a certain infrastructure or the prohibition of a certain market behaviour.
In case of notified transactions, the Commission will have the power to prohibit the subsidised concentration or the award of the public procurement contract to the subsidised bidder.
How will the proposed Regulation ensure that the administrative burden on companies is limited?
The proposed Regulation aims at ensuring the efficacy and efficiency of enforcement, while limiting the administrative burden on companies and public authorities.
This will be achieved through:
- The setting of relatively high thresholds for notification of concentrations and procurements, in order to focus resources and burdens on the largest cases.
- The general market investigation tool, which allows the Commission to review other market situations as well as subsidised concentrations and procurements not meeting the thresholds, allows intervention to be targeted to cases where it suspects that a foreign subsidy and a distortion of the Single Market may be involved.
APPLICATION
Who will be responsible for the enforcement of the Regulation?
Based on the feedback received on the White Paper, the enforcement of the Regulation would lie exclusively with the Commission, to ensure its uniform application across the EU.
How does the Regulation propose to ensure that the enforcement is effective? What tools will you have to achieve this?
First, if a company does not notify a subsidised concentration or financial contribution in a procurement meeting the thresholds, the Commission will be able to impose fines and review the transaction as if it had been notified.
To effectively collect information, the notification system will be complemented by deterrent sanctions in case companies refuse to submit complete and accurate information, in line with what currently exists in EU merger control.
In ex-officio cases, the initial information can come from the market, including the competitors, business associations or other interested parties.
The Commission will be able to ask companies to supply relevant information and impose fines and penalties if they refuse. It may also conduct on-site inspections.
If, however, it were not possible to gather all necessary information, e.g. from companies based outside the EU, the Regulation would give the power to the Commission to decide the case on the basis of the facts available.
THE GLOBAL CONTEXT
How does this fit in the international context?
The European Commission remains committed to developing the multilateral framework to ensure a level playing field for our companies. This is why we will in parallel strive to address the issue of distortive subsidies through new international rules. We have been driving a process to advance this discussion together with the US and Japan. Today's proposal complements these efforts, by closing a gap in our competition, public procurement and trade tools. As a top priority, we will work to reform the WTO, including with new rules on competitive neutrality. In addition, we will continue to improve rules on subsidies in our bilateral trade agreements.
NEXT STEPS
What are the next steps?
The European Parliament and the Member States will now discuss the Commission's proposal in the context of the ordinary legislative procedure with a view of adopt a final text of the Regulation.
The proposal will also be open for an 8 week public consultation.
Once adopted, the Regulation will be directly applicable across the EU.
For more information:
DG Competition website on Foreign Subsidies