EU Commission already under pressure to investigate foreign subsidies?

The EU’s Foreign Subsidies Regulation started to apply about a month ago. Most observers expected the regulation’s strongest impact to be on M&A transactions, not least because the European Commission does not exactly seem to have an abundance of staff to deal with the new rules. Yet, the regulator received at least two complaints against foreign subsidies not related to M&A, but to one of Europe’s most political industries. The Commission already under pressure?

As a quick reminder, the Foreign Subsidies Regulation (FSR) is meant to tackle the (perceived) issue of companies receiving subsidies from non-EU countries and thereby gaining an unfair competitive advantage over other companies in the EU’s internal market (more in our previous posts here and here). The FSR has three main pillars: A new review regime for M&A deals, a review regime for public bids of a certain size, and the power for the European Commission to launch (ex officio) market investigations.

The general expectation was that the new M&A regime will have the most impact, and that market investigations would be somewhat on the “backburner” at least for a while. That might change rather sooner than later.

The complaints

At the end of last week, Spain’s top football league LaLiga (inter alia home to Real Madrid and the FC Barcelona) filed a complaint against French club Paris Saint-Germain (PSG, known even by non-fans as the ex-club of Messi and Neymar). PSG is ultimately owned by Qatar’s state fund.

LaLiga went public with its complaint, alleging that PSG “obtains resources on non-market terms which distort several closely related markets” and that this allows the club to improve its sporting performance and, in return, its “competitive position in markets related to sporting competitions (e.g. those for the audiovisual marketing of competitions or the sponsorship market)”.

But this was not the first complaint: In May this year, so even before the FSR started to apply, Belgian football club Royal Excelsior Virton complained to the Commission about its rival Lommel SK. Lommel belongs to the same group as, inter alia, Manchester City, which is ultimately held by Abu Dhabi’s Sheikh Mansour bin Zayed Al Nahyan.

Royal Excelsior Virton alleged that Lommel SK would have had to be relegated would its owner not have provided funds allowing the club to obtain a professional license for the 2023/24 season in Belgium.

The Commission’s powers

The FSR gives the Commission the power to investigate “all markets situations” on its own initiative. If, as a result of such an investigation, the Commission determines that a foreign subsidy distorts the EU’s internal market, it will issue a decision imposing redressive measures (or accepting commitments from the concerned companies).

The Commission’s powers to investigate are very broad and range from requests for information to dawn raids, interim measures and fines for non-cooperation. That is at least the theory.

The issue

The issue at least for the months to come will be that the Commission might still be short-staffed when it comes to the FSR. While the regulator should be able to deal with upcoming M&A notifications, running ex officio investigations is capacity-intensive and might be more difficult. The Commission’s Executive Vice President Vestager said recently that the regulator will need more staff to be able to deal with the FSR workload.

Also, the Commission has broad discretion on how to deal with complaints – the FSR itself does not even mention the word “complaint” and does not foresee any kind of formal complaint procedure. So, time will tell what will come out of the complaints, even though going against perceived inflated funding of certain football clubs could serve the Commission a public win in the eyes of many football fans.

The takeaways

At least three things stand out:

• The complaints are a good example of how the practical impact of (new) rules can develop quickly. Neither the legislator nor the Commission might have expected the first focus of the FSR to be on football.
  
• Both complainants went public with their complaints, a playbook seen more and more often, in particular in cases that might gather the attention of the broader public.
  
• It could very well be intended that the publicity might put the Commission in a difficult spot. Even in case a market investigation takes time and/or in case the Commission uses its discretion to dismiss the complaints, this will likely not happen without the public taking note.

And finally, of course, the complaints are yet another example of how “popular” antitrust and adjacent areas of law have become in the world of sports (more examples, e.g., in our posts here and here).

Photo by Matt Benson on Unsplash