By contrast, FSR notification is required for mergers when:

• at least one party is established in the EU with a turnover higher than €500 million;
• combined foreign financial contributions (“FFCs”) from non-EU states exceed €50 million in the past 3 years.[6]

The FSR grants the European Commission three enforcement tools:[7]

• Mandatory notification for large mergers
• Mandatory notification for large public procurement bids
• Ex-officio investigations, which do not depend on the size of markets or contracts.

For dealmakers, this dual-track system means clearing EUMR control alone is no longer sufficient. Alongside traditional competition analysis, firms must also demonstrate that foreign state support does not distort the level playing field in the EU. Since turnover thresholds for FSR notification are much lower than those of the EUMR, mergers that may not have required clearance in the past may now be subject to scrutiny.

The economics behind FSR and the two merger cases[8]

The first step of the FSR substantive assessment lies in determining whether a measure meets the three necessary conditions to qualify as a foreign subsidy: attributability, benefit and specificity. This step, in addition to the legal assessment of attributability, may require financial analysis to assess whether the foreign state acted as a “standard” shareholder. In other words, did the foreign state follow the Market Economy Operator Principle (MEOP), or did it pursue other objectives? In order to answer this question, returns requested by and granted to the foreign state are compared with those expected by and granted to private investors. If the returns to the state are lower than what a private investor would expect, the difference in returns may be considered as a foreign subsidy. This is fundamentally a financial analysis that has traditionally been performed in EU State Aid control cases.

The second step requires checking whether the foreign subsidies induce market distortions. To do so, the nature and terms of the subsidies must be assessed, as well as their link to the beneficiary’s activities and their potential impact on market outcomes. This step addresses the issue of potential distortion both in the acquisition process itself (i.e. whether the offered price may have been higher than a competitive price due to the existence of a subsidy) and in the markets in which the target operates (i.e. whether competition in product markets may be affected by the existence of a subsidy after the merger goes through). This is similar to undertaking an economic assessment and analysing counterfactuals in merger control. It takes into account market shares, profitability, innovation and determinants of competition, among many other factors. For example, in a case of favourable financing, the competitive process may be affected if competitors are constrained financially while significant investments are needed and contemplated. In cases of more favourable procurement costs (e.g. from an internal subsidiary based outside of the EU), the subsidy may feed in through lower prices in the EU, undermining competitors’ ability to compete based on an undistorted cost base.

As of November 2025, the Commission has received over 200 FSR merger notifications but so far launched in-depth investigations into only two cases, and both involved state-backed buyers from the UAE:

• e&/PPF (€2.5 billion, 2024) – UAE telecom operator e& acquired PPF Telecom Group’s assets in Central and Eastern Europe.
• ADNOC/Covestro (€14.7 billion, 2025) – Abu Dhabi National Oil Company (ADNOC) bid for German chemical giant Covestro.

Both in-depth investigations ended with conditional approvals, but the remedies and decision rationale appear noticeably different.

e&/PPF: functional separation from parent company[9]

The Commission found that e& benefited from foreign subsidies, notably an unlimited state guarantee and other financial support (such as grants, loans and other debt instruments) from the UAE. This finding relied heavily on benchmarking the loan terms obtained from state-backed entities against those obtained or observed for private investors. While these subsidies did not distort the bidding process (e& was the sole bidder), the Commission explained the deleterious impact of the mechanism on competition in the output markets by showing that the subsidies enabled riskier investments in spectrum auctions and infrastructure, where e&’s competitors were more constrained in their financing.

To neutralise these effects, e& agreed to remove the unlimited guarantee by amending its articles of association and to restrict the parent company’s ability to finance the subsidiary, except in cases of financial distress. The rationale behind the remedy is clear and consistent with the identified potential distortion: cut off the source of distortion to prevent leakage into the common market.

ADNOC/Covestro: guarantee removal and patent licensing[10]

The Commission identified that ADNOC benefited from foreign subsidies from the UAE, including an unlimited state guarantee to ADNOC, a committed capital increase by ADNOC into Covestro and advantageous tax measures. These subsidies purportedly allowed ADNOC to offer unusually favourable acquisition terms and would grant Covestro the ability to pursue aggressive strategies post-merger.

As a result, ADNOC proposed the following remedies: (i) adapting its articles of association to remove the unlimited guarantee and (ii) licensing Covestro’s sustainability patents under transparent terms with certain market participants for 10 years. The first remedy closely resembles the measure imposed in the e& case; however, the second, aimed at spreading innovation benefits, appears to have no clear link with the alleged financing advantages that it is intended to correct. This remedy may deliver positive spillovers for European companies, but its link to the identified distortion is unclear. Ultimately, the decision raises questions about whether FSR enforcement is drifting towards broader policy objectives, such as sustainability, rather than focusing on economic principles.