EU Plans New Powers To Restrict Takeover Bids By Foreign Entities

The European Union wants to restrict foreign companies that receive government subsidies from engaging in its market, potentially causing repercussions for Chinese-backed firms in particular.

The European Commission, the executive arm of the EU, proposed on Wednesday, May 5, three new tools to enable it to have the power to investigate financial contributions given by public authorities from non-EU nations. This would happen when the recipient firm tries to participate in the European market.

“We want every company that operates in Europe no matter where it comes from to respect our house rules,” European competition chief, Margrethe Vestager, said during a press conference.

The European Union does not allow European governments to provide financial support to companies if this aid undermines fair competition. However, the rules have left foreign subsidies off the hook for decades and the Commission wants to change that.

“Companies have been free to use foreign subsidies to buy up business here in Europe. Some have been able to undercut their competitors in public tenders not because they are more efficient, but because they get financial support from foreign countries and that’s not fair towards those companies who don’t get that kind of subsides,” Vestager also said.

State influence has often been discussed in the EU, but the ongoing pandemic has made the issue even more pressing as many businesses are struggling for cash. In addition, there’s been a growing concern over Chinese firms who have been particularly active in the European market in the wake of the 2011 debt crisis.

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