EU Commission tackles companies investing in Europe with state support

epa08130517 A building of a Greener European commission in Brussels, Belgium, 15 January 2020. During plenary Session this week, European commission defended Budget of the European Green Deal plan. EPA-EFE/OLIVIER HOSLET

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State-backed foreign firms will have a harder time buying European Union companies under a proposal by the the European Commission.

New measures were needed because the existing foreign direct investment screening rules and trade defence measures were not enough to ward off a potential post-coronavirus buying spree of cheap assets, the European Commission said on Wednesday (June 17).

The EU fears foreign subsidies may be used to grow market share or underbid European rivals to gain access to strategically important markets or critical infrastructure.

“The role of the Commission is to uphold the single market and to take action when third countries subsidise their companies and distort the level playing field within our union,” the European Commission’s antitrust chief Margrethe Vestager told a news conference.

She added: “That is why we need the right tools to ensure that foreign subsidies do not distort our market, just as we do with national subsidies. Today’s White Paper launches an important discussion on how to address effects caused by foreign subsidies. The Single Market is key to Europe’s prosperity and it only works well if there is a level playing field.”

Foreign firms seeking to buy a stake of more than 35% in an EU company with a turnover of more than 100 million euros ($112 million) would have to inform the Commission if they have received more than 10 million euros in state aid.

Failure to do so could lead to fines or a veto of the deal, and the buyers could have to sell assets to make up for any unfair advantage gained.

Companies already present in the 27-country bloc could be forced to report foreign subsidies to the Commission if these exceed more than 200,000 euros over three years.

Such companies may also have to sell assets, reduce market share or capacity, or make payments to rebalance any distortions under the proposals, which are open for consultation to September 23 after which the Commission will decide on legislation.

Reuters / European Commission

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