Ensuring effective and sufficient sanctions: Furthermore, ensuring effective and sufficient sanctions is of great importance. The previously proposed limitation of sanctions to a price surcharge of up to 20 percent is considerably too narrow. Even sanctions with a fixed cap of a price surcharge at a maximum of 40 percent may not be sufficient. In this respect, it might be advisable to provide flexibility for the upper cap of the sanctions so that, for example, a price surcharge of 50 percent should also be possible under certain circumstances. For particularly serious cases, the possibility of completely excluding a bid should also be provided for. In particular, this should be given greater consideration if the bidder in question is demonstrably a state-owned enterprise from a third country identified as closed or unfair. One argument in favor of a complete exclusion in these cases is that the increasing occurrence of such companies on EU markets, often with suspiciously low prices, has recently proven to be particularly problematic in many cases.
Market Distortions due to Third-Country Subsidies In June of 2020, the European Commission presented proposals for new control instruments (“modules”) to address third-country subsidies that distort competition in the internal market in its White Paper on levelling the playing field as regards foreign subsidies (COM(2020) 253 final).6 German industry welcomes the objective set out in the White Paper, but notes that there is a need for adjustments to the shaping of the modules. It is especially important that they are coherent with existing EU law. Status quo An increasing number of third-country companies are also operating in the EU's internal market. Thirdcountry subsidies that favor these actors can therefore also have an effect in the internal market and may distort competition there. Such third-country aid can, for example, result in extraordinarily low bids in the context of public procurement in the EU. This means that bidders subsidized by third countries can undercut other bidders by submitting particularly low bids and thus win contracts. Such extremely low bids would not be economically sustainable without the third-country subsidies, so that competition for the contract is distorted to the detriment of other bidders who do not receive third-country subsidies. However, third-country subsidies can also distort competition when acquiring shares, voting rights or otherwise "material influence" in EU companies. Competition between potential buyers of EU companies can be distorted by the fact that only a third-country subsidy (strengthening of financial power) makes it possible to submit an acquisition offer that is favored over offers from other potential buyers; at the same time, this also impairs investment opportunities in EU companies. While EU state aid law provides effective control for Member State subsidies, there is a lack of comparable control and monitoring for third-country subsidies. To protect competition in the internal market from distortions caused by third-country aid and to ensure a level playing field in the EU, effective control mechanisms for third-country subsidies are needed as well. The European Commission's White
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On May 5, 2021 the European Commission published a subsequent legislative proposal to the White Paper: https://ec.europa.eu/competition/international/overview/proposal_for_regulation.pdf. From German industry's point of view, it is very positive that the European Commission is now presenting a legislative proposal to curb market distortions caused by massively subsidized companies from third countries. Particularly in the case of takeovers and public procurement, companies need fair opportunities and a level playing field. The right balance must be struck between effective third-country subsidy control and maintaining the EU's openness to investment (this initial assessment will be followed by a detailed evaluation by the BDI). In the following, the analysis in this position paper refers only to the preceding White Paper.
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