What you need to know
- FSR deemed effective: The European Commission considers the Foreign Subsidies Regulation (FSR) “fit for purpose” following its review, and any change should simplify procedure rather than narrow the European Commission's enforcement toolkit.
- Data collection burden: The most relevant practical concern remains the collection and reporting of Foreign Financial Contribution (FFC) data, especially in low-risk and complex investment structures.
- No overhaul, but simplification ahead: Draft targeted adjustments to the FSR are expected in autumn 2026, with adoption planned for 2027. Until then, companies should continue to build FSR screening and FFC data collection into transaction and procurement timetables.
The European Commission reports on the FSR
On 14 July 2026, the European Commission published a report on its first review of the FSR. The FSR closes a regulatory gap by enabling scrutiny of foreign subsidies granted to undertakings in the internal market, complementing merger control, antitrust, State aid, public procurement and trade policy rules. The FSR has applied since 13 July 2023, with ex ante notification obligations for certain concentrations and public procurement procedures taking effect on 13 October 2023.
The key message of the report is twofold. The European Commission still regards the FSR as effective against distortions caused by foreign subsidies. At the same time, it acknowledges that the FSR imposes significant administrative burdens on companies. The review also notes that third-country subsidy control systems have not materially developed since the FSR was adopted, reinforcing the European Commission's view that the FSR remains necessary to address foreign subsidies not caught by traditional EU trade defence mechanisms.
The report is the European Commission’s first review under Article 52(2) of the FSR, which requires a review every three years. The evidence relied on includes an external Study on the Simplification and Review of the FSR (prepared by LE Europe, data+law and the University of Vienna), stakeholder input from a public consultation questionnaire and call for evidence, and the European Commission’s internal enforcement review.
The European Commission considers the FSR “fit for purpose”
The European Commission concludes that the FSR's first years of implementation show it fulfils its purpose. In particular, the FSR helps preserve a level playing field in the internal market and enables the European Commission to identify, assess and redress potentially distortive foreign subsidies.
The review highlights several aspects that support the FSR's effectiveness.
- M&A/Concentrations: Ex ante review enables scrutiny before a transaction is implemented. By 31 May 2026, the European Commission had received 273 formal FSR notifications. Of these, 247 closed after preliminary review, four were withdrawn during preliminary review and 19 remained under preliminary review. Around 97% of notified and concluded concentrations therefore closed after preliminary review without an in-depth investigation, a share consistent with Phase I clearance rates under the EU Merger Regulation. The European Commission opened in-depth investigations in three concentration cases. Two were conditionally approved after the parties offered commitments addressing potential distortions, while the third remained under investigation at the time of publication. The review also takes a positive view of pre-notification engagements with the European Commission case team, finding that they improved clarity and efficiency, and were responsive during the notification process.
- Public procurement: Public procurement now shows the FSR's practical enforcement impact beyond M&A, especially in high-value tenders where foreign subsidies may affect contract awards. By 31 May 2026, the European Commission had received 5,150 submissions across 863 public procurement procedures, including 4,293 declarations, 733 notifications and 124 pre-notifications. The European Commission opened four in-depth investigations; one resulted in commitments and three closed after the economic operators withdrew. These cases show that FSR compliance affects both bid strategy and participation in high-value tenders.
- Ex officio investigations: The European Commission's ex officio powers remain a complementary tool for other market situations. The European Commission opened in-depth ex officio investigations into companies operating in the threat detection systems sector and the wind turbine manufacturing sector. It does not propose immediate changes to the ex officio procedure and will continue using that tool when necessary.
The European Commission also points to the measures taken to increase the transparency and predictability of the regime, including the FSR Guidelines, regular updates to the FSR Q&As, publication of case information and non-confidential decisions, and the FSR Registry for concentration proceedings.
Where the FSR still causes friction
The external FSR Review Study, public consultations and further stakeholder feedback present a mixed picture of how the FSR is operating in practice. The evidence does not suggest that stakeholders object to the FSR as a matter of principle. Rather, stakeholders widely acknowledge the FSR's objective of capturing foreign subsidies with potential distortive effects in the internal market. The main areas of concern are:
- FFC data collection: Companies face significant administrative burdens collecting and reporting FFC data. In concentration cases, stakeholders describe data collection as resource-intensive and criticise the inclusion of information that may not be relevant to distortion risk. The external FSR Review Study supports this: 77% of respondents reported that information collection required substantial internal resources, and 85% reported delays in transaction or procurement timelines caused by the reporting requirement.
- Scope of reportability: The broad FFC definition requires companies to collect information across multiple jurisdictions and determine the scope of reportable information.
- Procedural complexity in public procurement: The review notes awareness gaps among contracting authorities, a failure by economic operators to notify, incomplete submissions, tight deadlines and the lack of a stop-the-clock mechanism. Unlike the general procedural complexities of FSR investigations, these issues are specific to the two-step filing process and the coordination required between bidders and contracting authorities in procurement procedures.
- Call-in uncertainty: Stakeholders identify uncertainty over the European Commission’s call-in powers for below-threshold concentrations, though they do not question the powers’ legitimate aim.
- Transparency and clarity: Stakeholders seek greater clarity on certain reporting obligations and greater transparency in enforcement practice.
The burden of FSR compliance is acute for smaller or low-risk companies, portfolio companies and private equity or investment fund structures. This conclusion is supported by the external FSR Review Study, which identified a potential mismatch between the reporting burden and substantive risk of investment funds. In 69% of cases involving an investment fund acquirer, parties had to report Article 5 FFCs – the category of foreign financial contributions considered most likely to distort the internal market. The trigger was often not a subsidy in the ordinary sense, but state-linked investors (such as sovereign wealth funds or public pension funds) committing capital to the fund.
In the cases reviewed by the European Commission, those capital contributions were not treated as subsidies when state-linked investors invested on market terms. This suggests fund structures can give rise to extensive FFC reporting obligations, even where the underlying FSR risk is limited. For such structures, the data collection burden may be disproportionate. Parties should continue to assess FSR issues early and plan data collection processes.
No overhaul, but targeted adjustments planned
The European Commission does not consider structural changes to the FSR necessary, but will assess targeted procedural adjustments. The aim is to reduce administrative burdens, facilitate compliance and preserve the FSR’s effectiveness. These adjustments should reduce the number of submissions, streamline reporting requirements and focus on cases more likely to raise substantive concerns.
For concentrations, the European Commission identifies four possible adjustments:
- increase the turnover notification threshold. Under the FSR, the European Commission may amend the EU turnover threshold for notifiable concentrations by delegated act, increasing or decreasing it by up to 20%. Such amendments can occur only once during the relevant delegation period, meaning the threshold can be raised to a maximum of EUR 600 million; any further increase would require a legislative amendment.
- introduce a simplified notification procedure for low-risk transactions, including reduced information requests, and streamlined reporting of FFCs that do not fall within categories considered most likely to distort the internal market.
- moderately increase the reporting thresholds for FFCs.
- introduce additional exemptions from FFC reporting requirements for financial contributions that do not fall within categories considered most likely to distort the internal market.
For public procurement, the European Commission envisages further procedural adjustments. These include simplifying the notification and declaration forms, revising the waiver framework to limit disclosure of certain FFCs, clarifying and limiting the reporting of FFCs not categorised as foreign subsidies that are most likely to distort, and clarifying the rights and obligations of companies and contracting authorities (including in relation to the processing of confidential information in access-to-file procedures).
The key question will be whether these adjustments also meaningfully reduce the practical burden of FFC data collection in low-risk situations.
What this means in practice
The European Commission intends to publish draft targeted adjustments to the FSR in autumn 2026 and will invite stakeholder comments. It plans to adopt the adjustments in 2027.
Until then, the FSR remains applicable in its current form. Companies should continue FSR screening in M&A and public procurement, and plan FFC data collection early. In M&A, parties should build FSR analysis into transaction planning alongside merger control and foreign investment screening, particularly where parties have complex public-sector revenue, financing or ownership links. In public procurement, bidders should treat FSR compliance as part of bid strategy, because incomplete submissions, tight deadlines and the absence of a stop-the-clock mechanism create real procedural friction.
Companies affected by broad FFC reporting requirements should document practical burdens that can be raised in the upcoming consultation. They should also consider whether the draft adjustments, once published, meaningfully reduce reporting obligations for low-risk situations, portfolio companies and private equity or investment fund structures.
Other authors: Guillaume Vatin, Senior Associate; Dimitra Karakioulaki, Associate; Sarah Schaible, Transaction Lawyer; Aamir Hajjout, Research Assistant.
