ERU, Alm.del - 2019-20 - Bilag 424: EMs notat samt høringssvar om hvidbog om lige konkurrencevilkår i forbindelse med udenlandske subsidier, KOM (2020) 0253, fra erhvervsministeren

Erhvervsudvalget 2019-20
ERU Alm.del Bilag 424
Offentligt

23 September 2020

The Danish Government’s response to the European Commission’s

White Paper on levelling the playing field as regards foreign subsidies

The Danish Government welcomes the opportunity to comment on the

White Paper on levelling the playing field as regards foreign subsidies.

The Danish Government welcomes the initiative from the Commission to

address distortions from foreign subsidies, as such subsidies are currently

not under the same scrutiny as state aid originating from EU countries. Un-

regulated foreign subsidies risk distorting competition in the single market

leading to unfair competition between subsidized and non-subsidized com-

panies. This is not fair. Therefore, the Danish Government agree that we

need the right tools to ensure that foreign subsidies do not distort our mar-

ket, just as we do with our European subsidies.

A well-functioning Single Market that ensures effective competition be-

tween companies

–

foreign as well as European

–

is essential for prosperity,

competitiveness, growth and consumer welfare in the European Union.

Consequently, it is paramount for the Danish Government that a new legal

act respects the principles of open and effective competition and avoids

fencing out competition from foreign companies that would otherwise be

active in the single market on equal terms. The objective of a new legal act

as proposed in the White Paper should indeed be to ensure a level playing

field to the benefit of consumers without creating an instrument fostering

protectionism.

In general, the Danish Government recommends the Commission to intro-

duce a general instrument as described in Module 1 and a specific instru-

ment as described in Module 2. We find that these instruments will be able

to address distortions of the Single Market appropriately. In order to ensure

that the instruments will detect all distortive foreign subsidies and that en-

forcement is efficient, the Danish Government suggests to evaluate the in-

struments within a short time frame. However, the Danish Government

cannot support a specific instrument addressing foreign subsidies in public

procurement. In the following, our specific remarks will be elaborated:

General issues needed to be addressed in the coming Impact Assesment

Analyze the economic effects and administrative burdens

In the coming Impact Assessment, we urge the Commission to analyze both

positive and negative economic effects and the administrative burden of

regulating foreign subsidies, including further analysis into the magnitude

of current and future expected distortions caused by foreign subsidies

ERU, Alm.del - 2019-20 - Bilag 424: EMs notat samt høringssvar om hvidbog om lige konkurrencevilkår i forbindelse med udenlandske subsidier, KOM (2020) 0253, fra erhvervsministeren

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within the single market and to what extent the modules will effectively

address the distortive effects and how they can be expected to impact con-

sumers. Such analyses should also include assessing the likely effects on

investments, including investments from non-EU companies, growth and

prices in the internal market.

Interplay between the new instrument and existing regulation

It is important to analyze and consider how the proposed instruments will

relate to and interact with existing EU regulation, including merger control

and trade defense instruments (cf. below) as well as the screening of foreign

direct investments (FDI) and the public procurement directive. A new in-

strument should provide companies with transparency and a high degree of

legal certainty as regards the regulation that applies for a certain practice

or activity, and it should minimize the economic and administrative bur-

dens on companies complying with or being investigated under the regula-

tion.

Furthermore, the Danish Government finds that it is important to make

clear how the proposed instruments are conceived to interact with the trade

defense instruments and in particular make sure that foreign subsidies are

not offset twice (e.g. both by the instruments proposed in the White Paper

and by the trade defense instruments). Consequently, it is important to en-

sure effective and comprehensive cooperation in regard to trade defense

instruments investigations (conducted by DG Trade) and the investigations

proposed with regard to the instrument to tackle foreign subsidies (con-

ducted by DG COMP).

Finally, Danish government encourages the Commission to share its views

on how the proposed instrument will possibly affect international trade and

investment relations, including the risk of retaliatory measures from other

countries keeping in mind that many EU-firms with activities outside EU

also receive domestic subsidies.

General remarks

Table the new instrument as a Regulation to ensure uniform application

The new legal act will affect all subsidized businesses operating in the Sin-

gle Market. In order to avoid fragmentation across the Single Market by

member states implementing the legal act differently, the Danish Govern-

ment urges the Commission to put forward a regulation that ensures har-

monized and effective application.

Clear and objective definitions

In order for the instrument to work effectively, central concepts need to be

put into place. The Danish Government finds it important that definition of

foreign subsidies corresponds to the EU rules and case-law on state-aid in

order not to discriminate.

ERU, Alm.del - 2019-20 - Bilag 424: EMs notat samt høringssvar om hvidbog om lige konkurrencevilkår i forbindelse med udenlandske subsidier, KOM (2020) 0253, fra erhvervsministeren

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Further, it is important that the definition of the EU-test is based on clear

and objective criteria, insofar as the EU-test will not be subject to political

posturing, which will create legal uncertainty for the businesses in question.

Specific remarks on Module 1-3

General instrument addressing foreign subsidies (Module 1)

The Danish Government agrees with the Commission that there is need for

a general instrument addressing foreign subsidies distorting competition in

the Single Market. We agree that there is a regulatory gap and we find that

the framework described by the Commission under Module 1 in principle

will be able to address distortions of the Single Market appropriately.

The Danish Government finds it suitable to provide the Commission with

exclusive enforcement responsibility until further experience of the func-

tioning of the instrument is gathered. Further, the Danish Government sup-

ports the redressive measures as regards to redressive payments or behav-

ioral remedies. The Danish Government does not in general support struc-

tural remedies, since such remedies are very extensive on the businesses in

question. If structural remedies are considered, proportionality must be par-

amount.

The introduction of a new instrument as described in Module 1 should be

evaluated within a short time frame focusing on the effects of the enforce-

ment and whether

any “gap cases“ giving

rise to significant distortions have

been identified.

Acquisitions facilitated by foreign subsidies (Module 2)

The Danish Government agrees with the Commission that is a need for an

instrument addressing acquisitions facilitated by foreign subsidies. How-

ever, the Danish Government finds that there is a need to elaborate on the

interplay between module 1 and 2 as acquisitions facilitated by foreign sub-

sidies can be addressed ex post under the general instrument described un-

der Module 1.

The Danish Government support the Commission to place the competence

exclusively at EU level and not shared between EU level and Member State

level.

The Danish Government finds it important to ensure that the instrument

and its scope is as transparent as possible in order to avoid unnecessary

administrative burdens for the companies, and consequently it would be

appropriate to use a quantitative criteria/threshold to specify the obligation

ERU, Alm.del - 2019-20 - Bilag 424: EMs notat samt høringssvar om hvidbog om lige konkurrencevilkår i forbindelse med udenlandske subsidier, KOM (2020) 0253, fra erhvervsministeren

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to notify an acquisition. A turnover-based threshold

–

benefitting from the

experience of calculating turnover with respect to merger control

–

would

be much preferred.

Furthermore, the Danish Government finds that it will be appropriate if

thresholds are based on relatively high turnovers, e.g. turnover thresholds

equivalent to the thresholds in the existing merger regulation system in

Regulation 139/2004. The introduction of a new instrument as described in

Module 2 should be evaluated within a short time frame, and based on such

evaluation it should be considered whether it is necessary to lower the

thresholds to require notification of more transactions. If the Commission

decides to develop a general instrument as described in Module 1, such

instrument will make it possible to carry out ex post-investigations of ac-

quisitions facilitated by foreign subsidies that fall below the threshold.

Furthermore, if the Commission decides to develop an instrument address-

ing acquisitions facilitated by foreign subsidies the Danish Government

urges the Commission to reflect on the following in the coming Impact As-

sessment:



First, we urge the Commission to reflect on the magnitude of current

and/or future expected distortive effects due to acquisitions facilitated

by foreign subsidies. In this regard we also urge the Commission to

elaborate on the amount of acquisitions in the EU that are (potentially)

facilitated by foreign subsidies.

Second, we recommend the Commission to elaborate on how the in-

strument described under Module 2 can work in parallel with the exist-

ing merger regulation system in Regulation 139/2004, the possible new

instrument described under Module 1 and the FDI screening mecha-

nism. We find it important that the proposed new instrument can work

in parallel with the existing regulation. In this regard we also find it

very important that the proposed new instrument in Module 2 does not

lead to unnecessary administrative and economic burdens for the in-

volved undertakings.

Third, we advise the Commission to elaborate on how information re-

ceived in relation to a merger notified according to the existing merger

regulation can be shared in relation to a proceeding regarding foreign

subsidies.

Fourth, we urge the Commission to demonstrate how acquisitions fa-

cilitated by foreign subsidies causes a distortion in the Single Market

per se?

In particular, the Commission is recommended to elaborate on

the theories of harm caused by foreign subsidized acquisitions as well



ERU, Alm.del - 2019-20 - Bilag 424: EMs notat samt høringssvar om hvidbog om lige konkurrencevilkår i forbindelse med udenlandske subsidier, KOM (2020) 0253, fra erhvervsministeren

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as the standard for intervention. The Danish Government is not con-

vinced that all acquisitions facilitated by a foreign subsidy would au-

tomatically distort the internal market.



Finally, we urge the Commission to reflect on how transparency can

be ensured for acquiring undertakings. We find that it is important that

it is clear to acquiring undertakings when they have received a financial

contribution

–

or expect to receive a financial contribution after the no-

tification

–

that will be defined as foreign subsidies.

Foreign subsidies in public procurement (Module 3)

The Danish Government does not see a need to address distortions caused

by foreign subsidies in public procurement procedures by a separate instru-

ment as suggested in Module 3, but prefers to address this in the context of

the provisions regarding abnormally low tenders in the public procurement

directive. Moreover, the Danish Government would prefer to initiate the

investigation process by the contracting authority determining whether the

tender is abnormally low or not. We assume that foreign subsidies only

cause distortions of the procurement procedure through abnormally low

tenders. By restricting the tenders being investigated to abnormally low

tenders we limit the number of tenders being investigated and the number

of procurement procedures being delayed. This will be in line with the pro-

curement directive, which stipulates that the contracting authority only can

make requirements linked to the subject-matter of the contract.

The Danish Government finds that Module 3 in fact poses the risk of re-

sulting in less competition and higher prices in the EU procurement mar-

kets to the disadvantage of the citizens in the member states. Obligating the

tenderer to notify the contracting authority whether they, any of their con-

sortium members, subcontractors or suppliers have received a financial

contribution classified as foreign subsidies within the last three years or

during the execution of the contract requires a lot of information on the

supply chain, which the economic actors do not necessarily have. Conse-

quently, we risk putting ourselves in a situation where many economic ac-

tors might abstain from participating in the public procurement procedures

because of the administrative burden and the subsequent risk of receiving

a penalty.

Especially SME’s might be reluctant to participate in public pro-

curement procedures.

The interplay between contracting authority and supervisory authorities

have to be well-functioning with a clear ambition to keep the investigation

and in-depth review period within strict time limits and within the existing

time limits of the public procurement directive.

ERU, Alm.del - 2019-20 - Bilag 424: EMs notat samt høringssvar om hvidbog om lige konkurrencevilkår i forbindelse med udenlandske subsidier, KOM (2020) 0253, fra erhvervsministeren

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Module 3 will cause a substantive administrative burden on the public sec-

tor as well. If the Commission intends to continue the work on Module 3,

we urge the Commission in its Impact Assessment to put forward figures

illustrating to which extent foreign subsidies cause distortions in public

procurement procedures. We urge the Commission to reflect the following

issues:



How many companies active in the EU that are subsidized by foreign

governments win tenders in the EU?

How many companies active in the EU that are part of a consortium,

are subcontractors or suppliers are subsidized by foreign governments

and win tenders in EU?

How can we ensure that public buyers do not have an incentive to pri-

oritise bids from the EU over bids from third countries and thus de

facto discard these in order to avoid prolonged investigations?

Final remarks

We hope these comments will be useful for your further work. The Danish

Ministry of Industry, Business and Financial Affairs would be at your dis-

posal to further elaboration or any follow-up questions you may have.