EU Foreign Subsidies Regulation Interaction With German Competition Law

1. Introduction

The EU Foreign Subsidies Regulation (FSR), Regulation (EU) 2022/2560, creates a new layer of economic regulation alongside German competition law. Its purpose is to address competitive distortions caused by financial contributions from non-EU governments, particularly where those contributions enable an undertaking to obtain an advantage in the EU internal market.

The FSR has applied since July 2023, while mandatory notification requirements for certain concentrations and public-procurement procedures began in October 2023.

German competition law, principally the Gesetz gegen Wettbewerbsbeschränkungen (GWB), continues to regulate restrictive agreements, abuse of dominance and German merger control through the Bundeskartellamt. German merger control focuses principally on whether a concentration significantly impedes effective competition, whereas the FSR asks a different question: whether a foreign subsidy has distorted the internal market and whether that distortion requires redressive intervention.

Thus, the two regimes are complementary rather than substitutes.

2. Basic distinction between the FSR and German Competition Law

The most important point is that the same transaction may be examined under both regimes for different reasons.

3. Why the FSR is particularly important in Germany

Germany has one of Europe's most developed merger-control systems. The Bundeskartellamt examines hundreds of concentrations each year and can prohibit transactions that significantly impede effective competition.

The FSR adds another question:

Was the competitive position of the acquiring undertaking artificially strengthened by financial support from a non-EU government?

This is particularly important for transactions involving:

• Chinese state-owned enterprises;
• Middle Eastern sovereign-backed companies;
• state-supported infrastructure companies;
• foreign energy companies;
• foreign telecommunications companies;
• semiconductor and technology businesses;
• battery and electric-vehicle manufacturers;
• strategic infrastructure;
• German industrial champions;
• large public-procurement contracts.

The interaction is therefore especially significant for German manufacturing, chemicals, telecommunications, energy, infrastructure and technology markets.

4. Different jurisdictional objectives

A. German merger control

Under German merger control, the Bundeskartellamt examines whether a concentration will significantly impede effective competition.

Relevant considerations include:

• market shares;
• market power;
• barriers to entry;
• buyer power;
• vertical foreclosure;
• conglomerate effects;
• innovation competition;
• access to important inputs;
• creation or strengthening of dominance.

The German system therefore primarily asks:

“What will this transaction do to competition?”

B. FSR

The FSR asks an additional question:

“Has a foreign financial contribution enabled the undertaking to obtain an unfair competitive advantage in the internal market?”

A foreign financial contribution can potentially qualify as a foreign subsidy where the relevant conditions under the FSR are satisfied.

The Commission can investigate whether the subsidy:

1. improves the competitive position of the recipient;
2. distorts competition in the internal market;
3. is linked to a concentration, procurement procedure or other economic activity;
4. warrants balancing and corrective intervention.

The Commission expressly states that, following an in-depth investigation, it balances the negative effects of the distortion against positive effects before imposing redressive measures or accepting commitments.

5. The "two-layer" merger-control model

A transaction involving a German target can therefore potentially face:

Layer 1 — EU/German merger control

The relevant competition authority examines:

Does the concentration substantially/significantly impede competition?

Layer 2 — FSR

The European Commission examines:

Did foreign subsidies distort the internal market and provide the parties with an unfair advantage?

These questions are legally distinct.

A transaction could therefore be:

Competition-law acceptable + FSR problematic

or:

Competition-law problematic + FSR acceptable

or:

Problematic under both regimes.

This is perhaps the most important feature of the interaction.

6. FSR and German merger control are not interchangeable

The FSR does not simply replace German merger control.

For example, a foreign company might acquire a German undertaking in a transaction that does not create significant horizontal overlap.

The Bundeskartellamt might therefore conclude:

no significant impediment to effective competition.

But the European Commission might identify:

substantial foreign subsidies that gave the acquirer an artificial financing advantage.

The transaction could consequently encounter an FSR problem despite the absence of a conventional German competition-law problem.

Conversely, a transaction could raise serious German merger concerns even where the acquiring company receives no relevant foreign subsidy.

7. Interaction with the German "SIEC" test

German merger control is based on the significant impediment to effective competition (SIEC) standard.

The FSR does not modify that substantive German test.

Instead, foreign subsidies can become economically relevant evidence within the overall transaction analysis.

For example, subsidised financing may allow an acquirer to:

• offer a higher acquisition price;
• sustain losses;
• finance aggressive expansion;
• acquire strategically important assets;
• undercut competitors;
• provide below-market financing;
• maintain excess capacity.

These circumstances may affect the competitive assessment under the GWB.

However, the Bundeskartellamt and Commission must keep their distinct statutory tests conceptually separate.

8. Case Law 1 — e& / PPF Telecom

Significance: First major FSR concentration investigation

The e& / PPF Telecom transaction is the leading early FSR concentration precedent.

The UAE-based Emirates Telecommunications Group sought to acquire PPF Telecom. The Commission identified concerns surrounding, among other things, an unlimited state guarantee that could improve e&'s financing position.

The Commission opened an in-depth investigation in June 2024.

The case ultimately became the Commission's first FSR decision, with commitments adopted in September 2024.

Importance for Germany

The case establishes that:

• foreign-state guarantees can be relevant;
• financing advantages can affect merger analysis;
• FSR review is independent of ordinary EU/German merger control;
• remedies can address the subsidised advantage rather than simply the market structure.

Principle

A transaction can raise FSR concerns because of the financial conditions supporting the acquisition, even where the ordinary competition assessment asks a different question.

9. Case Law 2 — ADNOC / Covestro

Significance: Foreign subsidies and a major German target

This is particularly important for German competition law because Covestro AG is a German chemicals company.

In 2025, the Commission opened an in-depth FSR investigation into ADNOC's proposed acquisition of Covestro.

The Commission identified potential foreign subsidies including:

• an unlimited UAE guarantee;
• a proposed capital increase;
• other financial contributions potentially qualifying as foreign subsidies. 

Legal importance

This illustrates the interaction extremely well.

A German target may simultaneously be subject to:

1. German/EU merger-control analysis;
2. FSR scrutiny;
3. foreign-investment considerations;
4. sector-specific regulatory review.

Principle

The strategic importance of a German target does not prevent the FSR from independently examining whether foreign state support has distorted the acquisition process.

10. Case Law 3 — CRRC / Piraeus / European rail-sector FSR investigations

The Commission's early FSR enforcement involving foreign-supported industrial and infrastructure businesses demonstrates another important point: state-backed foreign companies can raise competition concerns beyond conventional market-share analysis.

The relevance to German competition law is especially strong for:

• rail infrastructure;
• rolling stock;
• energy;
• telecommunications;
• industrial equipment;
• public procurement.

German competition authorities traditionally focus on market structure and competitive effects. The FSR additionally investigates whether a foreign state has altered the economic conditions under which the undertaking competes.

Principle

The source of competitive advantage matters under the FSR even where traditional merger-control analysis would ordinarily concentrate on market structure.

11. Case Law 4 — Siemens/Alstom

Significance: EU merger control and industrial policy

The Siemens/Alstom merger is one of the most important modern EU competition-law precedents concerning strategic industrial sectors.

The Commission prohibited the proposed combination because it considered that the transaction would significantly reduce competition in markets including high-speed and very-high-speed trains and signalling.

Although this was not an FSR case, it is highly relevant to understanding the interaction.

The case demonstrates that EU competition law can already scrutinise:

• state-backed industrial champions;
• infrastructure markets;
• strategic technologies;
• global competitors;
• innovation;
• future competition.

FSR significance

The FSR adds a separate dimension:

Even if consolidation is not itself anticompetitive under merger-control principles, foreign subsidies may independently create an unfair advantage.

Thus, Siemens/Alstom provides the competition-control baseline, while the FSR supplies an additional subsidy-distortion layer.

12. Case Law 5 — Illumina / GRAIL

Significance: jurisdictional reach of EU merger control

The Illumina/GRAIL litigation is important for understanding how EU competition jurisdiction can reach transactions involving innovative businesses and strategic technologies.

The case also illustrates the increasingly broad European approach to jurisdiction and enforcement in transactions involving businesses that may have limited conventional turnover but potentially significant competitive importance.

Relevance to FSR

The FSR similarly reflects a move away from relying exclusively on traditional turnover-based concepts.

This matters because foreign-subsidised acquisitions may involve:

• innovative technology;
• data;
• intellectual property;
• strategic infrastructure;
• emerging competitors.

The FSR therefore complements the trend demonstrated by Illumina/GRAIL:

Traditional turnover and market-share measures do not necessarily capture the full competitive significance of modern strategic acquisitions.

13. Case Law 6 — Continental Can

Significance: structural control and European competition law

Continental Can v Commission remains foundational for European merger and competition law because of its treatment of dominance and structural changes in markets.

Although predating the FSR, the case demonstrates the broader European principle that competition law can intervene where corporate structures create significant risks to competitive conditions.

FSR connection

The FSR extends this structural logic in a different direction.

Instead of asking only:

Does the transaction create or strengthen market power?

the FSR may ask:

Did foreign state support materially contribute to the transaction's competitive advantage?

Thus, Continental Can represents the historical structural competition-law foundation, while the FSR introduces state-subsidy distortion as a distinct regulatory concern.

14. Case Law 7 — CK Telecoms

Significance: economic assessment of mergers

The CK Telecoms litigation concerning the proposed Three/O2 merger is important because of the Court of Justice's discussion of the SIEC standard, competitive constraints and the evidentiary requirements for merger intervention.

Its relevance to FSR interaction lies in demonstrating that competition authorities must substantiate the competitive effects of a transaction.

The FSR has a different substantive framework, but similar questions of:

• causation;
• competitive advantage;
• economic effects;
• evidence;
• counterfactual analysis;
• proportionality

can arise.

Principle

FSR intervention cannot simply be based on the existence of a foreign financial contribution; the Commission must establish the legally relevant subsidy and its distortionary effects under the Regulation.

15. Case Law 8 — Booking.com / Bundeskartellamt

The German Booking.com litigation is important for the relationship between German competition law and EU competition principles.

The Bundeskartellamt's approach to platform power illustrates Germany's willingness to address competitive harm arising from:

• network effects;
• platform dependency;
• contractual restrictions;
• digital market power.

FSR relevance

The FSR could become relevant where a foreign-subsidised digital platform uses state-supported financing or resources to expand into German markets.

This produces a possible cumulative framework:

foreign subsidy → financial advantage → expansion → increased market power → GWB concerns.

The FSR could address the subsidy distortion, while German competition law could address the subsequent conduct or market power.

16. FSR and Section 19 GWB

Section 19 GWB prohibits abusive conduct by dominant undertakings.

Suppose a foreign-subsidised undertaking becomes dominant in Germany because subsidised financing enables it to:

• acquire competitors;
• price aggressively;
• secure exclusive infrastructure;
• subsidise downstream services;
• invest heavily in capacity.

The FSR could address the foreign subsidy.

Section 19 GWB could subsequently address abusive conduct arising from the resulting market position.

Therefore:

FSR ≠ §19 GWB

but:

FSR + §19 GWB can operate sequentially or cumulatively.

17. FSR and Section 19a GWB

The interaction is even more significant for large digital companies.

Section 19a GWB gives the Bundeskartellamt enhanced powers concerning undertakings of paramount significance for competition across markets.

A foreign-subsidised technology company could potentially be subject to:

• FSR scrutiny concerning its foreign financial contributions;
• §19a GWB scrutiny concerning its cross-market power;
• §19 GWB scrutiny concerning abusive conduct;
• EU Digital Markets Act obligations where applicable.

This creates a multi-layer regulatory architecture.

18. FSR and German procurement

The interaction is not confined to mergers.

The FSR also applies to certain public-procurement situations where foreign subsidies may allow an undertaking to submit an unduly advantageous tender.

This has major implications for Germany because of its substantial public procurement markets.

Potentially affected sectors include:

• railways;
• defence-related infrastructure;
• energy;
• telecommunications;
• construction;
• transport;
• digital infrastructure;
• renewable energy.

The Commission can investigate whether foreign subsidies enabled an undertaking to submit an unduly advantageous tender and can prohibit award or accept binding commitments where appropriate.

19. Example: Chinese state-supported company bidding for a German infrastructure contract

Assume:

Company X, supported by a Chinese state-owned bank, bids for a major German rail infrastructure project.

The company receives financing below market terms.

German competition law

The authorities could consider whether the company's conduct or market position raises competition issues.

Procurement law

The contracting authority examines the tender under German/EU procurement rules.

FSR

The Commission can investigate whether the financial contribution constitutes a foreign subsidy and whether it enabled an unduly advantageous offer.

Thus:

one economic transaction → three potentially relevant regulatory frameworks.

20. FSR and German state-aid law: an important distinction

A critical conceptual distinction must be made between:

EU State Aid rules

These principally regulate advantages granted by EU Member States.

FSR

This addresses foreign subsidies from non-EU countries.

Before the FSR, there was a regulatory asymmetry:

EU state support was heavily regulated, while foreign state support could sometimes enter the EU market without an equivalent subsidy-control mechanism.

The Commission expressly identifies this regulatory gap as one of the reasons for the FSR.

This is particularly relevant to Germany because German companies receiving German government support remain primarily subject to EU State Aid rules, while a non-EU competitor receiving foreign government support may fall under the FSR.

21. The FSR does not give the Bundeskartellamt the main enforcement role

Another important point is institutional.

The European Commission, rather than the Bundeskartellamt, is the principal authority enforcing the FSR.

The Bundeskartellamt remains responsible for German merger control and other GWB matters.

Consequently:

European Commission → FSR

Bundeskartellamt → GWB

This division is especially important in transactions involving German targets.

22. Procedural interaction in a German acquisition

Consider a hypothetical acquisition:

UAE Company A acquires German Company B.

The transaction could require:

Step 1 — German merger control

Does the transaction meet GWB thresholds?

If yes, Bundeskartellamt examines competitive effects.

Step 2 — EU merger control

If the transaction has a Community dimension, EU merger control may apply instead.

Step 3 — FSR notification

If the FSR concentration thresholds are satisfied, the transaction must also be notified to the Commission.

Step 4 — FSR preliminary review

The Commission assesses the relevant foreign financial contributions.

Step 5 — In-depth FSR investigation

If sufficient indications of a distortive subsidy exist, the Commission may proceed to an in-depth investigation.

Step 6 — Remedies

Possible FSR commitments or redressive measures may be required.

Therefore, parties cannot assume that merger clearance equals regulatory clearance.

23. FSR's balancing test

The FSR has an important feature that distinguishes it from conventional competition law.

Where the Commission establishes a distortive foreign subsidy, it can conduct a balancing assessment.

The negative effects of the subsidy are weighed against positive effects associated with the subsidised activity.

This introduces a broader economic assessment.

For example:

Negative effects

• foreclosure;
• increased market power;
• displacement of competitors;
• reduced innovation;
• strategic dependency.

Positive effects

• investment;
• employment;
• environmental benefits;
• technological development;
• economic growth.

The Commission can then determine appropriate remedies.

24. Potential conflict between German and EU assessments

A difficult question arises when:

Bundeskartellamt clears a transaction, but the Commission prohibits or remedies it under the FSR.

This is legally possible because the two authorities apply different legal instruments.

There is no contradiction merely because their outcomes differ.

The Bundeskartellamt may conclude:

"The concentration does not significantly impede competition."

The Commission may conclude:

"The acquisition is distorted by foreign subsidies."

These are different legal findings.

25. Remedies under the two systems

German merger control

Possible remedies include:

• divestiture;
• access commitments;
• behavioural obligations;
• structural remedies;
• prohibition.

FSR

The Commission may use:

• commitments;
• structural or behavioural redressive measures;
• restrictions concerning acquisitions;
• repayment or elimination of advantages in appropriate circumstances;
• prohibition of a concentration in the circumstances provided by the Regulation.

The practical result is that a transaction may require two different remedy packages.

26. German competition law as a complementary enforcement mechanism

The FSR should not be regarded as replacing German competition law.

Instead, the relationship can be expressed as:

FSR attacks the subsidised advantage.

GWB attacks anticompetitive conduct and market power.

For example:

Foreign government financing

↓

Artificially strengthened undertaking

↓

Acquisition of German competitor

↓

Greater market power

↓

Exclusionary conduct

↓

FSR + GWB enforcement

This is the emerging regulatory model.

27. Strategic significance for German industry

The interaction is particularly important in sectors where government support is economically significant:

Automotive

Foreign subsidies may finance:

• EV manufacturing;
• batteries;
• charging infrastructure.

Telecommunications

Foreign state support may facilitate:

• network acquisition;
• spectrum-related investment;
• infrastructure deployment.

Energy

Potential issues concern:

• wind turbines;
• solar equipment;
• hydrogen;
• grids;
• storage.

Chemicals

The ADNOC/Covestro investigation demonstrates the importance of FSR scrutiny for a major German industrial company.

Digital technology

Foreign-supported companies may acquire:

• cloud infrastructure;
• AI companies;
• semiconductor assets;
• data-intensive platforms.

28. Strategic autonomy and German competition policy

The FSR reflects a significant change in European economic regulation.

Traditional competition law primarily asks:

Is competition being harmed?

The FSR adds:

Is competition being distorted because a foreign state has provided an artificial economic advantage?

This brings economic security, strategic autonomy and competition policy closer together.

Germany is particularly important because of its large industrial base and its position as a major destination for foreign investment.

29. Important legal principles emerging from the interaction

Principle 1 — Separate legal tests

FSR distortion and GWB competitive harm are not identical.

Principle 2 — Cumulative scrutiny

One transaction can face multiple regulatory regimes.

Principle 3 — Foreign subsidies are not automatically unlawful

The existence of a financial contribution does not by itself establish a prohibited distortion.

Principle 4 — Economic advantage matters

Preferential financing, guarantees, grants and similar benefits can become central to the analysis.

Principle 5 — Strategic transactions receive greater scrutiny

Large acquisitions involving German strategic businesses are especially likely to attract regulatory attention.

Principle 6 — Remedies may overlap

A transaction may require commitments under more than one regulatory regime.

Principle 7 — EU law increasingly supplements national competition law

The FSR is another example of EU-level intervention operating alongside national competition authorities.

30. Six-plus case-law framework at a glance

31. Current enforcement trajectory

The FSR is no longer merely a theoretical instrument.

By May 2026, the Commission reported receiving 273 formal concentration notifications, with three concentration cases having proceeded to in-depth investigation.

The enforcement trajectory is increasingly relevant to Germany because recent cases have involved major German assets. The ADNOC/Covestro investigation is particularly significant, while current European enforcement also shows continuing scrutiny of foreign-supported industrial and infrastructure businesses.

This suggests that FSR compliance will increasingly become a standard part of major German M&A due diligence.

32. Compliance implications for companies

Companies involved in German acquisitions should maintain a dedicated FSR workstream alongside ordinary merger-control analysis.

They should identify:

1. all foreign financial contributions;
2. government loans;
3. guarantees;
4. tax benefits;
5. grants;
6. capital injections;
7. preferential financing;
8. transactions with state-owned entities;
9. government-provided goods or services;
10. subsidies received by subsidiaries;
11. subsidies received by relevant investment vehicles.

This is particularly important because an acquisition structure can appear commercially private while ultimately being supported by state-linked financing.

33. Conclusion

The interaction between the EU Foreign Subsidies Regulation and German competition law represents a fundamental expansion of European competition governance.

German competition law, particularly the GWB, remains focused on market power, restrictive conduct and competitive effects. The FSR introduces a separate inquiry into foreign state-supported economic advantages and their distortionary effects on the EU internal market.

The relationship can therefore be summarized as:

GWB = competition structure and conduct.

FSR = foreign-subsidy distortion.

EU State Aid law = Member-State subsidies.

Together = a multi-layer system of European competitive neutrality.

The e&/PPF Telecom and ADNOC/Covestro matters demonstrate that FSR scrutiny can materially affect acquisitions involving European—and particularly German—assets. The earlier merger jurisprudence of Continental Can, Siemens/Alstom, Illumina/GRAIL and CK Telecoms, together with German digital-market enforcement, provides the broader competition-law framework within which the new FSR regime operates.