On 10 June 2024, the European Commission announced that it has opened an in-depth investigation to assess, under the Foreign Subsidies Regulation (FSR), the acquisition by the Emirates Telecommunications Group Company PJSC (e&) of sole control of PPF Telecom Group B.V. (PPF), excluding its Czech business. This is the first in-depth investigation under the FSR, which entered into force on 12 July 2023 and aims to address distortions caused by foreign subsidies in the EU internal market.

Key takeaways

• The Commission has preliminary concerns that e& may have been granted foreign subsidies that could distort the EU internal market, notably in the form of an unlimited guarantee from the UAE and a loan from UAE-controlled banks directly facilitating the transaction.
• The Commission will assess whether the foreign subsidies lead to actual or potential negative effects on the acquisition process and on the internal market with respect to the merged entity's activities.
• The Commission has 90 working days, until 15 October 2024, to take a decision. The opening of an in-depth investigation does not prejudge the outcome of the investigation.
• The FSR requires companies to notify concentrations to the Commission when certain turnover and foreign financial contribution thresholds are met. The Commission may accept commitments, prohibit the concentration, or issue a no-objection decision.
• The FSR is part of the EU's efforts to ensure a level playing field for all companies operating in the internal market while remaining open to trade and investment.

Background

e& is a State-controlled telecommunication operator based in the United Arab Emirates (UAE). PPF is a European telecommunication operator and a subsidiary of the PPF Group. PPF operates in Czechia, Bulgaria, Hungary, Serbia (Yettel) and Slovakia (O2). The transaction was notified to the Commission on 26 April 2024.

The FSR is a new set of rules that enables the Commission to address distortions caused by foreign subsidies, and thereby allows the EU to ensure a level playing field for all companies operating in the internal market while remaining open to trade and investment. The FSR applies to foreign subsidies granted to companies engaging in economic activities in the EU, regardless of their origin, ownership or legal structure.

The FSR covers three types of situations: (i) concentrations involving foreign subsidies, (ii) bids for public procurement contracts involving foreign subsidies, and (iii) other market situations involving foreign subsidies. The FSR provides for a notification system for concentrations and public procurement procedures, and a general market investigation tool for other situations. The FSR also establishes a cooperation mechanism with third countries to facilitate the exchange of information and the resolution of concerns.

The FSR empowers the Commission to impose redressive measures or accept commitments to remedy the distortions caused by foreign subsidies. The redressive measures may include structural or behavioural remedies, such as divestments, licensing, access, transparency, or repayment of the foreign subsidy. The Commission may also prohibit a concentration or exclude a bidder from a public procurement procedure if the foreign subsidy cannot be remedied.

The FSR complements the existing EU rules on competition, trade, and investment, and does not affect the rights and obligations of the EU and its Member States under international agreements.

Implications for clients

The FSR introduces a new layer of scrutiny for companies that receive foreign subsidies and engage in economic activities in the EU. Companies should be aware of the notification obligations and the potential redressive measures that may apply to their transactions, bids, or other market situations. Companies should also monitor the developments of the Commission's investigations and decisions under the FSR, as they will shape the interpretation and application of the new rules.

Our law firm has extensive experience and expertise in advising clients on EU competition, trade, and investment matters. We can assist clients in assessing the impact of the FSR on their activities, preparing notifications and submissions to the Commission, and engaging with the Commission and other stakeholders throughout the FSR proceedings. We can also advise clients on the implications of the FSR for their contractual arrangements, due diligence processes, and risk management strategies.

Please do not hesitate to contact us if you have any questions or concerns regarding the FSR or the Commission's investigation into e&'s acquisition of PPF.