June 12, 2020 / 5:03 PM / 21 days ago

EU to tackle unfairly aided foreign firms on EU buying spree - EU draft

FILE PHOTO: European Union flags flutter outside the European Commission headquarters in Brussels, Belgium, June 5, 2020. REUTERS/Yves Herman

BRUSSELS (Reuters) - The EU wants to crack down on foreign companies using “unfair” state subsidies to acquire EU firms, according to a European Commission proposal seen by Reuters, as part of a strategy to protect its key industries and the single market.

European Competition Commissioner Margrethe Vestager, who will present the proposal on June 17, outlined her plan in an interview with Reuters on Tuesday, saying foreign subsidies risk fragmenting the single market and tilting the level playing field.

“There is an increasing number of incidences in which foreign subsidies appear to have facilitated the acquisition of EU undertakings, influenced other investment decisions or have distorted the market behaviour of their beneficiaries,” the EU draft said.

It cited the aluminium, steel, semiconductor, shipbuilding and automotive industries as prone to foreign subsidies such as zero-interest loans, unlimited state guarantees, zero-tax agreements or dedicated state funding.

Foreign companies seeking to buy a stake of more than 35% in EU firms which have a turnover of more than 100 million euros would have to inform the Commission if they have received more than 10 million euros in state aid in the past three years.

Failure to do so could lead to fines or a veto of the deal, and the buyers may have to sell assets to counter any unfair advantage.

The EU proposal also targets companies operating in the bloc and benefiting from foreign subsidies to grow market share or underbid European rivals to gain footholds in strategically important markets or access to critical infrastructure.

Such companies may also have to sell assets, reduce market share or capacity, or make payments to the bloc to rebalance any distortions.

The EU draft recommends a three-year ban on foreign aided companies taking part in public procurement tenders if they receive unfair foreign subsidies.

Reporting by Foo Yun Chee, editing by Louise Heavens, Kirsten Donovan

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