The European Commission Adopts the Foreign Subsidies Regulation Guidelines

In this blog post, authors Carole Maczkovics & Alessandro Cogoni (Covington) comment on the European Commission’s adoption of the FSR Guidelines in January 2026, which clarify how foreign subsidies are assessed under the EU’s Foreign Subsidies Regulation. The Guidelines explain how the Commission determines whether foreign subsidies distort the internal market, how potential positive effects are weighed against negative impacts, and how the Commission may use its call-in powers even below formal notification thresholds.

The authors note that while the Guidelines largely codify the Commission’s practice after more than two years of FSR enforcement, they do not resolve concerns about overbreadth and administrative burden. Companies under investigation may be required to show that foreign subsidies are not linked to their EU activities, or otherwise provide detailed analyses of their effects, with assessments conducted on a case-by-case basis rather than through presumptions of compatibility.

The post details the Commission’s analytical framework for identifying distortions, including whether a subsidy improves a company’s competitive position and whether it negatively affects competition. The Guidelines distinguish between targeted, non-targeted, and non-distortive subsidies, and require companies to analyze behavioral effects, competitive dynamics, and sometimes counterfactual scenarios, increasing the evidentiary and compliance burden across concentrations and market situations.

Finally, the authors discuss public procurement rules, the balancing of distortions against positive effects, and the Commission’s broad discretion to call in transactions or tenders below thresholds. Limited safe harbors are introduced, but the Commission retains the ability to intervene up until contract conclusion, signaling that companies operating in the EU must assess FSR risks even outside large mergers or major procurement procedures.

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