On May 5, 2021, the European Commission published its proposal for a regulation on foreign subsidies distorting the internal market. The proposal is intended to tackle the distortive effects of foreign subsidies granted to undertakings engaging in economic activities in the European Union, including those that (i) facilitate concentrations or (ii) influence the awarding of public contracts in the EU.

The proposal therefore complements existing EU tools, such as the State aid rules (which deal with distortions caused by Member State subsidies) and trade defense instruments (which deal with imports of subsidized goods), with a view to ensuring a level playing field. In relation to the treatment of concentrations that might be facilitated by subsidies, the proposal draws heavily on the existing EU merger control regime. It also introduces a potentially significant new market investigation regime.

This Legal Update provides further detail on the proposed new regulation, which will constitute an important and novel legislative instrument in the Commission's armory.

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Originally published 5 May 2021

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