European Commission Publishes Final FSR Guidelines: Key Takeaways for M&A, Procurement, and Subsidy Control

On 9 January 2026, the European Commission (the Commission) unveiled its final Guidelines on the application of certain provisions of the EU Foreign Subsidies Regulation (FSR), a document intended to bring order, clarity, and light to what has become increasingly contentious terrain for businesses operating across borders. The aim is straightforward: to increase predictability and transparency for companies navigating the Commission’s scrutiny of foreign state support. The Guidelines follow a public consultation conducted in 2025, which Goodwin contributed detailed comments to.

At its core, the text answers three questions that now define the FSR landscape: how the Commission determines whether a foreign subsidy distorts competition; how it balances any distortive effects against potential benefits; and when it may require notification of transactions or procurement procedures even when the formal thresholds are not met.

Assessing Distortion of Competition

The Commission’s analysis unfolds in two stages. First, it asks whether a foreign subsidy is liable to improve an undertaking’s competitive position in the EU. Second, it asks whether that improvement actually or potentially distorts competition.

A key clarification is the distinction between targeted and non-targeted subsidies. Targeted subsidies, those directly supporting EU economic activities, are, by definition, easier for the Commission to connect to an improved competitive position, and they will generally be treated as such without extensive further analysis. Non-targeted subsidies, by contrast, are not directed at EU activity and offer no clear indication of how the recipient intends to use the support. For these subsidies, the Commission will assess whether they could be transferred or redeployed to support EU activities through cross-subsidisation. If no credible legal or economic factors prevent, or render unlikely, such a transfer or redeployment, the subsidy may be treated as liable to improve the undertaking’s competitive position. Relevant considerations include group structure and integration, the design and conditions of the subsidy, legal or regulatory constraints, and the beneficiary’s financial situation.

Even where the first limb is met, the Commission must still determine whether the subsidy distorts competition. The focus is on behavioural change. In other words, whether the subsidy enables more aggressive bidding, pricing, expansion, or acquisitions, and whether those changes harm competitors or competitive dynamics. In public procurement, the question is whether the subsidy enabled an unduly advantageous bid that distorted competition for the contract.

In sum, targeted subsidies are, by definition, easier to connect to an improvement in competitive position in the EU. For non-targeted subsidies, companies would be well advised to identify and evidence credible legal or economic factors that prevent, or render unlikely, the transfer or use of the subsidy in EU activities.

The Balancing Test

Under Article 6 of the FSR, the Commission may balance the negative effects of a subsidy on competition against any positive effects linked to the subsidised activity or broader policy objectives. Only subsidy-specific positive effects will be considered, such as addressing market failures, supporting innovation, advancing environmental objectives, enhancing resilience, or pursuing social goals.

The Commission will assess whether any distortions go beyond what is necessary to achieve the stated objective. Avoidable distortions are less likely to be outweighed by claimed benefits. The burden of proof rests with the party invoking positive effects, which must be substantiated with concrete, verifiable evidence rather than general assertions.

The message for practitioners is unambiguous. The balancing test is fundamentally an evidence exercise. Where positive effects may be material, they should be framed early, linked tightly to the subsidy, supported with verifiable evidence, and presented in a way that demonstrates that any competitive harm does not exceed what is necessary to deliver the claimed benefits.

Call-In Powers

The Guidelines also explain when the Commission may require notification of a concentration or procurement procedure below the usual thresholds. In assessing “impact in the EU,” the Commission may look beyond turnover to factors such as the nature of EU activities, strategic assets or sensitive technologies, the sector concerned, and patterns of repeated acquisitions or procurement activity. Call-ins are unlikely where the aggregate amount of relevant foreign subsidies is below EUR 4 million over three years; where subsidies compensate damage from natural disasters or exceptional occurrences; or, typically, in procurement procedures below EU directive thresholds. Nonetheless, the Commission’s approach is broad, and transactions in strategic or sensitive sectors may still attract scrutiny.

While call-ins are intended to be exceptional, the Commission’s “impact in the EU” lens is expansive and can capture transactions involving strategic sectors, sensitive technologies, or patterns of acquisitions or procurement activity. Parties would do well to consider call-in risk early, particularly where state-linked support is involved, and build appropriate flexibility into transaction planning and timetables.

Practical Implications

While the Guidelines provide a clearer framework, assessments remain fact-specific. Companies should identify and assess relevant non-EU financial support early in M&A and tender processes, with particular attention to cross-subsidisation risks for non-targeted subsidies. Where positive effects may be relevant, these should be prepared early and supported by evidence. Call-in risk should also be factored into transaction planning and timetables from the outset.

As a reminder that FSR risk can be case-determinative, the Commission’s e&/PPF decision (cleared subject to commitments) remains a useful reference point. For more information, read Goodwin’s thoughts on that decision (May 2025).

This informational piece, which may be considered advertising under the ethical rules of certain jurisdictions, is provided on the understanding that it does not constitute the rendering of legal advice or other professional advice by Goodwin or its lawyers. Prior results do not guarantee similar outcomes.