BRUSSELS—The European Union will aim to minimize the burden on companies to comply with tough new rules for reporting foreign subsidies, the bloc’s competition chief said, focusing instead on what she referred to as the “big fish” that distort the European market.
The new foreign-subsidy rules, set to take effect later this year, could allow the EU to bar companies from making certain acquisitions or winning large public contracts if they previously received government aid that regulators consider to be distortive.
Once the legislation takes effect, companies participating in certain mergers or bidding on large public contracts will be expected to report past financial contributions from non-EU governments or risk hefty fines. Lawyers and some business groups, including the U.S. Chamber of Commerce, have warned of a significant administrative burden for American and other multinational companies.
Speaking at an event in Brussels on Monday, EU Executive Vice President
said she was aware that some companies have called for more clarity on how the new rules will be enforced. She said the European Commission, the bloc’s executive body, would attempt to keep red tape to a minimum and target the kinds of subsidies the bloc finds most concerning.
“We intend to focus on major distortions,” Ms. Vestager said. “It’s a priority in the implementation that we ensure that the compliance burden, particularly on smaller entities, is kept as low as possible.”
Supporters of the legislation have said the rules are needed to level the playing field between European businesses and some of their heavily subsidized competitors, including Chinese state-backed companies that often get cheap loans and other government benefits.
If the commission believes foreign contributions were distortive and had a net negative effect on the bloc, it could block a deal, disqualify a company from winning a tender or impose binding commitments. The regulator also has the power to look at whether subsidies are distorting the European market outside the context of a merger or procurement bid.
Based on the legislation and draft guidance for its implementation, lawyers have said the financial contributions companies may need to report could include a range of financial dealings with non-EU governments, including clean-tech tax breaks offered through the U.S. Inflation Reduction Act.
Ms. Vestager said in her speech Monday that the commission would be fair and balanced in applying the new rules.
“There may be a hiccup or two on the way, but we are determined to make the most of this tool,” she said.
Write to Kim Mackrael at email@example.com
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