Week Ahead (13 July)

W/C Monday, 13 July – Commission likely to publish first FRS review, expected to propose targeted simplification

The European Commission is expected to publish its first formal review of the Foreign Subsidies Regulation (FSR) this week, three years after the framework began applying. The report will assess whether the Regulation is operating effectively and whether changes are needed to reduce administrative burdens while preserving Brussels’ ability to investigate foreign state support that distorts competition within the Single Market.

Introduced in July 2023, the FSR filled a longstanding gap in the EU’s economic security framework by allowing the Commission to examine subsidies granted by non-EU governments. It provides for mandatory notification of qualifying mergers and public procurement bids, alongside ex officio powers enabling Brussels to investigate potentially distortive support outside those thresholds.

Early enforcement has revealed a clear tension between extensive procedural requirements and relatively limited substantive intervention. The Commission has received hundreds of notifications, but most transactions have been cleared during the preliminary review, frequently following lengthy pre-notification discussions. Until recently, only the ADNOC–Covestro and e&–PPF Telecom transactions had entered in-depth merger investigations, with both ultimately approved subject to behavioural commitments addressing state-backed financing, cross-subsidisation and implicit guarantees.

That pattern has now evolved with the Commission’s decision to open a Phase II investigation into JD.com’s acquisition of Ceconomy. The case represents the first in-depth FSR merger investigation involving a Chinese acquirer and suggests that Brussels is increasingly concentrating enforcement on state-linked financing structures, strategic sectors and transactions where foreign support may materially affect bidding or post-acquisition conduct.

The review is nevertheless expected to focus primarily on operational simplification. Industry feedback has been highly critical of the volume of information required, the broad definition of foreign financial contributions and thresholds that capture many low-risk transactions. Germany has led calls for higher notification thresholds and a narrower focus on genuinely distortive support, while companies have also highlighted duplication with merger control and national FDI screening.

Chinese stakeholders, by contrast, have argued that the Regulation is being applied disproportionately to Chinese companies and risks becoming a protectionist trade instrument. Several member states also remain wary of raising thresholds too far, particularly where investments concern sensitive technologies or critical infrastructure.

Overall, the most likely outcome is a targeted recalibration rather than a fundamental rewriting of the FSR. The Commission is expected to explore streamlined notification forms, simplified procedures for low-risk cases and clearer differentiation between routine transactions and strategically sensitive cases. The central objective will be to make enforcement more selective and administratively manageable while preserving broad discretion to intervene against foreign state-backed competition where the perceived risks are greatest.

Tuesday, 14 July – Paramount-WBD faces FSR Phase 1 deadline as DG COMP weighs sovereign wealth fund financing

The European Commission is expected to decide by tomorrow whether to clear, open an in-depth investigation or accept commitments under the Foreign Subsidies Regulation (FSR) in Paramount's proposed $110 billion acquisition of Warner Bros. Discovery (WBD), marking one of the highest-profile applications of the EU's new foreign subsidies regime to date.

The transaction is undergoing parallel reviews under both the EU Merger Regulation (EUMR) and the FSR. Even though the merger review has progressed towards a likely conditional Phase I clearance following the submission of remedies and the extension of the EUMR deadline from 7 July to 22 July, the FSR review has attracted particular attention due to the transaction's financing structure and the participation of Gulf sovereign wealth investors.

Unlike the EUMR review, which focuses on the transaction's impact on competition, the FSR examines whether financial contributions provided by non-EU governments may have conferred an unfair advantage on the acquiring parties. The review was triggered after the consortium backing the transaction, led by Skydance and supported by Saudi Arabia's Public Investment Fund (PIF), the Qatar Investment Authority (QIA) and Abu Dhabi's L'imad Holding Company, reportedly secured approximately $24 billion in sovereign-backed financing. Given WBD's substantial European turnover, the transaction comfortably exceeds the FSR's notification thresholds.

Thus, the financing dimension has remained one of the most politically sensitive aspects of the case throughout the review. Earlier this year, in May, a bipartisan group of US and European lawmakers publicly urged regulators to scrutinise the transaction under both the EUMR and the FSR, arguing that the involvement of sovereign wealth investors raised broader questions relating to foreign state influence, media plurality and economic security. The Commission has also reportedly issued detailed requests for information concerning the consortium's financing arrangements as part of its assessment.

Nevertheless, recent developments suggest the Commission's concerns have eased. Following an extensive pre-notification process, discussions between the parties and DG COMP have increasingly focused on demonstrating that the sovereign investors do not exercise effective control over the merged entity or benefit from distortive state support.  Overall, our base case remains that the transaction is likely to secure Phase I clearance under both the EUMR and the FSR.

Wednesday, 15 July – CJEU to hear Google AdSense case following recent Android ruling

On Wednesday, the Court of Justice of the European Union (CJEU), the EU’s highest court, is scheduled to hear the European Commission's appeal in the long-running Google AdSense antitrust case (Case C-826/24 P), as Brussels seeks to reinstate the €1.49 billion fine annulled by the General Court in 2024. The hearing represents the next major chapter in the Commission's broader legal campaign against Google's advertising and search businesses.

The dispute originates from the Commission's 2019 decision finding that Google had abused its dominant position in the market for online search advertising intermediation through restrictive contractual clauses in its AdSense for Search agreements with third-party websites. According to the Commission, Google prevented publishers from placing competing search advertisements on their websites, thereby restricting rivals' ability to compete and reinforcing Google's dominance in online search advertising.

However, in September 2024, the General Court annulled the €1.49 billion fine after concluding that, although the Commission had correctly identified potentially restrictive exclusivity and placement clauses, it had failed to demonstrate to the requisite legal standard that those provisions had actually produced anticompetitive effects capable of foreclosing competitors from the market. The Commission subsequently appealed that judgement in December 2024, arguing that the General Court had applied an excessively demanding standard when assessing the evidence.

The hearing comes only days after Google suffered another significant legal defeat before the CJEU, which dismissed the company's final appeal in the Android case (C-738/22 P) and confirmed the €4.125 billion fine imposed by the Commission over restrictions linked to the Android ecosystem. That ruling broadly followed Advocate General Juliane Kokott's earlier opinion and reinforced the Commission's antitrust enforcement record against Big Tech.

More broadly, the case forms part of the Commission's wider effort to defend several landmark competition decisions against Google, alongside ongoing appeals relating to its advertising technology business and parallel enforcement under the Digital Markets Act (DMA). Although no judgement is expected this week, the hearing will provide the first indication of how receptive the CJEU may be to the Commission's attempt to revive one of its most significant digital antitrust cases.

Friday, 17 July – European Commission to unveil long-awaited ETS review amid intensifying debate over free allocation and industrial competitiveness

The European Commission is expected to publish its long-awaited review of the EU Emissions Trading System (ETS) on Friday, following several postponements, in what is shaping up to be one of the most politically sensitive climate files of the year. The review is expected to determine how the ETS will evolve beyond 2030 as the EU seeks to reconcile its climate ambitions with mounting concerns over industrial competitiveness and carbon leakage.

The central focus of the review is expected to be the future of free allocation for sectors covered by the Carbon Border Adjustment Mechanism (CBAM). Over recent weeks, the direction of travel in Brussels has increasingly pointed towards a slower phase-out than currently envisaged, with growing expectations that the Commission will propose extending free allocation beyond the existing 2034 timetable, potentially towards 2039. A draft internal Commission presentation circulating in Brussels in previous days, albeit explicitly described as non-final, appears broadly consistent with that scenario. The document also explores a limited future role for international carbon credits, alongside the possible expansion of the ETS to municipal waste incineration and international aviation.

The review comes against a rapidly evolving political backdrop. Within the European Parliament, divisions have become increasingly pronounced. The EPP, led in part by its influential German delegation, has been advocating a more gradual reduction in emissions together with a slower withdrawal of free allowances and greater use of ETS revenues to support industrial decarbonisation. By contrast, the S&D and Greens have argued for broadly preserving the current ETS architecture, including maintaining the existing Linear Reduction Factor (LRF) and CBAM-related free allocation timetable, while Renew has largely sought to balance climate ambition with stronger investment incentives for industry. The debate therefore increasingly centres not on whether the ETS should be fundamentally rewritten, but where the eventual political compromise will be struck.

Similar divisions are emerging among member states. Poland, Italy and several other countries continue to push for a more industry-oriented approach, while a coalition including the Netherlands, Denmark, Sweden, Finland, Portugal and Luxembourg has urged the Commission to preserve a robust carbon price signal and avoid a significant weakening of the existing framework.

Against this backdrop, the Commission will likely pursue a middle-ground compromise rather than a fundamental redesign of the ETS. In practice, this is likely to involve a more gradual phase-out of free allocation, a moderate adjustment to the emissions reduction trajectory and additional measures to support industrial competitiveness, while preserving the overall architecture of the EU's flagship carbon pricing system. Attention will then quickly shift to the legislative negotiations, with the proposal due to be presented to the Council on 22 July before discussions begin in the European Parliament after the summer recess.