The EU Foreign Subsidies Regulation (FSR) has quickly become a central instrument in European competition, merger, and procurement review.
It gives the European Commission far-reaching powers to scrutinize financial contributions from non-EU governments to companies active in the EU, including in M&A transactions, public tenders, and ex officio investigations.
Introduced to fill a gap in the EU’s regulatory toolkit, the FSR raises economic questions beyond existing State aid practice: When does a financial contribution confer a benefit, a key condition for the existence of a foreign subsidy? When does such a subsidy distort competition? And how should the benefits to European consumers be weighed against the potential harm to competitors?
Johannes Dittrich and Lars Wiethaus contributed to Foreign Subsidies Regulation: Article-by-Article Commentary, edited by Prof. Dr. Marc Bungenberg and Dr. Ulrich Soltész (Nomos, 1st edition 2026, 819 pages). The commentary sets out the legal and economic challenges of the new regulation, as well as its practical implications for practitioners and academics. Dittrich and Wiethaus co-authored two of its economic chapters.
In an introductory chapter on the economic background of the FSR, Dittrich and Wiethaus, along with co-authors Elżbieta Głowicka, Anselm Mattes, Nicole Robins, and Simon Yarak, trace the economic case for the regulation from its policy origins through to its enforcement.
The chapter situates the FSR in a global subsidy race that left the EU’s open internal market exposed to distortions its State aid regime and other tools could not effectively reach. But it also asks what enforcement should aim to achieve: protecting a level playing field for European producers can conflict with preserving the benefits that subsidized goods provide to European consumers, and the chapter cautions that giving insufficient weight to consumer benefits creates a risk of overenforcement. This tension runs through the key economic issues the chapter then discusses for enforcement practice: benefit assessment, the indicator-based approach to identifying distortions of competition, the balancing test, and the design of remedies.
Every assessment under the FSR begins with the question of whether a foreign subsidy exists at all. In their commentary on Article 3 FSR, Dittrich and Wiethaus discuss the necessary conditions and the economic methods for establishing them, in particular, how the existence of a benefit should be evaluated. They set out why the market economy operator test (MEOT) is likely to be a central analytical tool for assessing benefits under the FSR, drawing on parallels with, and important differences from, EU State aid practice.
They also work through the benchmarking and counterfactual analysis required by the MEOT, from straightforward “pari passu” transactions and competitive tenders to more challenging cases that call for adjusted benchmarks or financial valuation methods. The chapter highlights the distinctive challenge of applying these tools to financial contributions by third countries, where comparators, data, and market structures can differ sharply from those in the EU and those used in State aid cases.
Finally, the chapter examines the FSR’s notification obligations, which, in contrast to the State aid regime, attach to financial contributions rather than to (beneficial) subsidies. Companies must therefore track and report financial contributions, even where these would clearly pass the MEOT. This shifts the benefit assessment to the Commission and creates a significant compliance burden for businesses.
Both chapters are grounded in early enforcement practice, including the Commission’s decisions in e&/PPF and ADNOC/Covestro, and reflect the FSR Guidelines published in January 2026. With the Commission’s first FSR review report on the horizon, the economic assessment of foreign subsidies will only grow in importance, making this commentary a timely reference for practitioners.
