The European Commission has opened its first in-depth (Phase 2) investigation under the EU Foreign Subsidies Regulation (FSR).
Under the FSR, M&A transactions need to be notified to and assessed by the European Commission before they can be implemented, where:
- the undertaking to be acquired, one of the merging undertakings (in the case of a true merger) or the joint venture is established in the EU and has aggregate EU turnover of €500 million or more; and
- the aggregate amount of the "foreign financial contributions" (essentially financial transfers from non-EU States / public authorities) received by the undertakings concerned is more than €50 million over the past three years.
The Commission said earlier this year that, since the regime came into force in mid-2023, it had engaged in pre-notification discussions in 53 cases, of which 14 were formally notified and 9 approved. It is thought that since then others have been approved following a preliminary Phase 1 investigation.
This is the first time a transaction has gone to a more in-depth Phase 2 investigation. The transaction concerned is the proposed acquisition by Emirates Telecommunications Group Company PJSC ("e&") of sole control over PPF Telecom Group. PPF runs telecom operations in Bulgaria, Hungary, Serbia and Slovakia. e& formally notified the proposed transaction to the Commission under the FSR on 26 April 2024. On 10 June 2024, the Commission opened its Phase 2 investigation on the basis that it considered there were sufficient indications that e& may have been granted foreign subsidies that distort the internal market.
This case is a useful reminder to M&A parties and practitioners to assess early on in a transaction whether the regime might apply (bearing in mind that the threshold for notification is referenced to "foreign financial contributions" – which could include arms' length payments for goods or services – not just subsidies) and factor it into the timetable and transaction planning as necessary.
For more detail, see our Competition, Regulation and Trade blog post here.
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