The European Commission has launched the first review of Regulation 2022/2560 (FSR), which governs foreign subsidies affecting competition in the internal market. It has opened a public consultation until 18 November 2025 and published draft Guidelines clarifying the criteria for distortion, the balancing of effects, and ex ante notifications. The review report will be presented by July 2026, and the final Guidelines will be published by 12 January 2026.
The European Commission recently launched the first review of the Foreign Subsidies Regulation ("FSR").
The FSR allows the Commission to investigate subsidies granted by third countries that distort competition in the internal market. The FSR establishes inter alia a mechanism for prior mandatory notification to the Commission of M&A transactions and public procurement procedures above certain thresholds. The Commission can also review these subsidies ex officio in cases where the thresholds are not met.
Two years after the start of the FSR’s implementation, the Commission intends to collect contributions from stakeholders by November 18, 2025, which will be used in the first FSR review report to be presented by July 2026.
In the meantime, the Commission has published draft guidelines on the implementation of the FSR ("Draft Guidelines"), which aim to clarify the Commission's approach and the principles by which it is guided in its implementation of the FSR.
The Guidelines focus on three critical areas of application of the Regulation:
- The identification of a distortion in the internal market, in general, and in particular in cases of public procurement procedures. The Draft Guidelines list the main factors relevant for concluding that a subsidy confers a benefit on a company operating in the internal market; provide guidance on the steps to assess whether this benefit improves the competitive position of the subsidised company and what the respective negative effects on competition are (including the company's behaviour, changes in competitive dynamics, among others); and also propose criteria for determining the effects of the subsidy in the specific context of public procurement procedures. In particular, the Commission indicates factors that may support the conclusion that the subsidy enables the submission of an “unduly advantageous tender”, such as comparison with other tenders submitted, comparison with the contracting authority's estimates and the carrying out of a counterfactual exercise;
- A balancing exercise of the positive effects of the subsidy and the distortive effects on the internal market (Article 6 of the FSR). The Commission provides some examples of positive effects to be considered in this exercise, specifying what it means by positive effects arising from the development of the subsidised activity in the internal market and the pursuit of Union policy objectives. In the case of public procurement procedures, it explains what it means by alternative sources of supply of goods and services. It also points out some principles for weighing up these elements in practice. On a procedural level, it clarifies that the burden of proof for these positive effects lies with the company interested in proving them;
- The conditions under which the Commission may require ex ante notification in cases where the concentration or procurement procedure does not meet the thresholds set for mandatory notification. These powers under Articles 21(5) and 29(8) of the FSR can be exercised when the Commission suspects that foreign subsidies may have been granted to the companies concerned in the three years preceding the concentration or the bid/request to participate in the public procurement procedure. The Commission clarifies, among other things, procedural aspects such as the timing for submitting a notification request, and the factors it takes into account to assess whether such cases merit an ex ante analysis.
The Guidelines should be published by January 12, 2026. The Guidelines will complement the guidance contained in the Frequently Asked Questions, updated on September 16, concerning the notification of holdings in mergers involving private investment funds. The Guidelines will add to the Commission Staff Working Document of 2024, which contained initial clarifications on the application of the FSR.
