The European Commission has published Guidelines on the application of certain provisions of the European Parliament and Council Regulation (EU) 2022/2560 on foreign subsidies distorting the internal market.
These guidelines clarify several key concepts:
- how the Commission assesses the distortion of competition caused by foreign subsidies,
- how negative effects are balanced with potential positive impacts, and
- how the Commission exercises its power to require prior notification even in cases below the established thresholds.
In assessing the distortion of competition, the Commission first examines whether the foreign subsidies strengthen the competitive position of the company in the EU. For subsidies that do not primarily target economic activities within the EU, a more detailed analysis is conducted to assess the risk of their use for cross-subsidization. The Commission then considers the impact on competition by analyzing whether the subsidy is likely to change the competitive behavior of the company to the detriment of other economic entities.
A specific approach is applied in public procurement procedures, where the Commission first assesses whether the economic entity could have used the foreign subsidy in designing the terms of its offer. If this is the case, the next step is to evaluate whether the submitted offer is disproportionately advantageous compared to other offers and the contracting authority’s estimates, and whether this advantage largely arises from the foreign subsidy or from other justified factors.
As part of the so-called balancing test, the Commission weighs the negative effects of the foreign subsidies against their specific positive effects. The severity of the distortion and whether the positive effects could have been achieved without the subsidy are also considered. If the positive effects outweigh the negative ones, the Commission will raise no objections. However, if the negative effects prevail, it may impose commitments or corrective measures.
The guidelines also clarify the “call-in” mechanism, which allows the Commission, under certain conditions, to request prior notification of otherwise non-notified mergers and acquisitions, and financial contributions in public procurement procedures. In all cases, however, the Commission must intervene before the mergers are fully implemented or the contracts are awarded.
A new feature is the introduction of “safe harbors”, which exempt from this mechanism procurement procedures for low-value contracts, subsidies below EUR 4 million, and subsidies addressing certain exceptional circumstances.
Spring Digital Legal Update 2026 here.