A US biotech mapping the clearances for a European acquisition assembles the map from familiar parts. Hart-Scott-Rodino sets the antitrust waiting period. The Committee on Foreign Investment in the United States matters when the capital moves the other way. European merger control attaches if the target is large enough, and a national foreign-investment screen attaches wherever the target happens to sit. Since 12 October 2023 the map has been missing a filing. The European Union’s Foreign Subsidies Regulation (FSR) imposes a mandatory pre-closing notification on qualifying concentrations, and what it examines is not the transaction’s effect on competition but the public money the parties have taken.1Regulation (EU) 2022/2560 on foreign subsidies distorting the internal market [2022] OJ L330/1 (FSR): Art. 3 (financial contribution and foreign subsidy), Art. 4 (distortion), Art. 5(1) (categories most likely to distort), Art. 6 (balancing test). In force 12 January 2023; applies from 12 July 2023; notification duties from 12 October 2023.
1. The Filing That Is Not Merger Control
The instinct of a deal team meeting the FSR for the first time is to fold it into the antitrust workstream. Everything about the regime’s shape invites that: a mandatory notification to the European Commission, a suspensory obligation, a preliminary review followed by a possible in-depth investigation, remedies negotiated against a clock. The instinct is wrong in the one respect that governs everything else. Merger control asks what the combined entity will do to competition. The FSR asks where the money came from. A transaction that raises no competitive concern in any jurisdiction on earth can require an FSR notification, sit through a review, and enter an in-depth investigation on the strength of grants the acquirer received years before the target existed.
The regime is no longer theoretical. By early 2026 more than two hundred concentrations had been formally notified, though the Commission publishes no official cumulative figure and the count moves depending on whether pre-notifications are included. On practitioner data compiled to early April 2025, US-based acquirers were the single largest acquirer nationality, ahead of France and the United Kingdom, and roughly one in three notified concentrations involved a private-equity or financial-sponsor buyer, which was the largest single category of notifying party.2Notification counts, acquirer-nationality splits and review durations are drawn from practitioner trackers, not from official Commission statistics. Three concentrations have reached an in-depth investigation (Cases FS.100011 and FS.100156, both cleared subject to commitments, and FS.100253, still pending); none has been prohibited. Figures are approximate and move with each reporting period. The reason US buyers lead the table is not that US capital is uniquely suspect. It is that US public support for life sciences is unusually dense, and the FSR counts it.
What the enforcement record does not support is alarm about prohibition. Three concentrations have reached an in-depth investigation in the regime’s history, two cleared subject to commitments in September 2024 and November 2025 and a third opened in May 2026 and still pending, and no concentration has been prohibited. No fine for failing to notify, or for closing in breach of the standstill obligation, had been publicly reported as of the date of publication.2 The exposure a US biotech actually carries is the ordinary one rather than the exotic one: a filing obligation that attaches on facts the deal team does not recognize as subsidy facts, and a standstill that runs until the Commission is finished with them.
2. Where the Trigger Actually Sits
A concentration must be notified where two conditions are satisfied together. At least one of the merging undertakings, the acquired undertaking or the joint venture must be established in the Union and generate an aggregate turnover in the Union of at least EUR 500 million; and the undertakings concerned must have been granted combined aggregate financial contributions of more than EUR 50 million from third countries in the three years preceding the conclusion of the agreement, the announcement of the public bid, or the acquisition of a controlling interest.3FSR (n 1), Art. 20(3): cumulative thresholds of EUR 500 million aggregate Union turnover for an EU-established party, and more than EUR 50 million in combined aggregate financial contributions from third countries over the preceding three years. The second limb counts financial contributions, not foreign subsidies. The first limb is a size test any US acquirer of a European asset will recognize. The second limb is where the regime stops behaving the way a US lawyer expects.
Art. 20(3) FSR counts financial contributions. It does not count subsidies. The Regulation holds three statuses apart, and the distance between them is the whole difficulty. A financial contribution exists under Art. 3(2) FSR wherever a third country transfers funds or liabilities, forgoes revenue that is otherwise due, or provides or purchases goods or services; the list is illustrative rather than closed, and it names grants, loans, loan guarantees, fiscal incentives and tax exemptions in terms. A foreign subsidy exists only where such a contribution additionally confers a benefit and is limited, in law or in fact, to one or more undertakings or industries, which is the selectivity condition in Art. 3(1) FSR. A distortion arises only at a third stage, under Art. 4(1) FSR, where the subsidy is liable to improve the undertaking’s competitive position in the internal market and thereby actually or potentially negatively affects competition in that market.1 The notification threshold reaches only the first of the three.
Attribution reaches further than a US reader assumes. A financial contribution is attributable to a third country where it comes from central government and from public authorities at all other levels, which means a Massachusetts Life Sciences Center award and a grant from the Cancer Prevention and Research Institute of Texas are contributions by the United States for these purposes. So are grants and cooperative agreements from the National Institutes of Health, Small Business Innovation Research and Small Business Technology Transfer awards, the federal credit for increasing research activities under 26 U.S.C. § 41, and the orphan drug credit under 26 U.S.C. § 45C.426 U.S.C. § 41 (credit for increasing research activities); 26 U.S.C. § 45C (orphan drug credit). Under the second subparagraph of FSR (n 1), Art. 3(2), a financial contribution is attributable to a third country where provided by central government or by public authorities at all other levels, so sub-federal programs count as contributions by the United States. Arrangements with the Biomedical Advanced Research and Development Authority (BARDA) sit on both sides of the line, since a procurement contract at market rates is a purchase of services within Art. 3(2) FSR while cost-reimbursement development funding is more naturally a transfer of funds under the same provision.
The obvious response is that a credit available to every US taxpayer performing qualified research cannot be a subsidy, because it is not selective. Whatever its merits, at the threshold stage that response is beside the point. Selectivity belongs to Art. 3(1) FSR, and the EUR 50 million limb does not reach Art. 3(1) FSR at all. The consequence is structural rather than procedural: the question that determines whether a filing is mandatory is a question about accounting, not about competition law, and it is answered by finance and tax functions who have never been asked it.
The threshold does not ask whether a company has been subsidized. It asks how much public money has passed through it, and a company that has never received a subsidy in any sense a US lawyer would recognize can still be required to file.
The notification form narrows the burden without narrowing the concept. Under Commission Implementing Regulation (EU) 2023/1441, Form FS-CO requires individual foreign financial contributions to be itemized only at or above EUR 1 million, and the detailed per-country reporting obligation is engaged where the estimated aggregate from a single third country over the three-year period reaches EUR 45 million.5Commission Implementing Regulation (EU) 2023/1441 [2023] OJ L177/1: Form FS-CO (Annex I) and Form FS-PP (Annex II). Individual contributions itemized at or above EUR 1 million; detailed per-country reporting engaged at an estimated aggregate of EUR 45 million over three years. Annex I to that Regulation and the Commission’s questions-and-answers together set the investment-fund perimeter. Deferrals of tax payments, tax amnesties, tax holidays, and ordinary depreciation and loss-carry-forward rules of general application need not be entered in that per-country overview, unless they are limited to particular sectors, regions or types of undertakings. The relief is narrower than it first appears. It reaches the overview table alone, tax benefits outside that table’s own short list of exclusions are reportable whether or not the notifying party regards them as general, and the form provides in terms that every foreign financial contribution counts toward the Art. 20(3)(b) FSR threshold whether or not any information about it is requested. The party filing does not get to make the generality call that would keep a contribution off the form.
3. What the January 2026 Guidelines Settled
Art. 46(1) FSR obliged the Commission to publish, at the latest on 12 January 2026, guidelines on four subjects: the criteria for finding a distortion under Art. 4(1) FSR, the balancing test in Art. 6 FSR, the power to require prior notification of a concentration under Art. 21(5) FSR or of foreign financial contributions in a procurement under Art. 29(8) FSR, and the assessment of distortion in a procurement under Art. 27 FSR. The Commission adopted its Guidelines on 9 January 2026 and published them in the Official Journal on 13 January 2026.6Communication from the Commission, ‘Guidelines on the application of certain provisions of Regulation (EU) 2022/2560 ... on foreign subsidies distorting the internal market’ [2026] OJ C/2026/224 (adopted 9 January 2026; published in the Official Journal 13 January 2026), mandated by FSR (n 1), Art. 46(1). Adoption and Official Journal publication dates differ and are frequently conflated.
On distortion, the Guidelines confirm that Art. 4(1) FSR imposes two cumulative conditions, that the subsidy be liable to improve the undertaking’s competitive position in the internal market, and that it thereby actually or potentially negatively affect competition in the internal market. The precision matters because benefit and selectivity are not conditions of distortion at all; they are conditions of the subsidy’s existence under Art. 3(1) FSR, and the Guidelines do not reopen them. What the Guidelines do reopen is the treatment of funding that never touches Europe. A subsidy is treated as targeted where it supports or is used for the undertaking’s activities in the internal market, and a targeted subsidy is considered to improve competitive position, generally without further assessment. A subsidy that is not targeted is assessed for its potential to cross-subsidize those activities, with common shareholding and functional, economic or organic links raising that potential, and with transfer-pricing rules generally insufficient to exclude it.6
For a biotech the sting sits in a single proposition. Foreign funding of research conducted outside the Union may be treated as targeted where the research relates to technologies or know-how that are, or can be, used in the internal market. A platform developed entirely in Maryland on federal development money is not thereby insulated from the analysis; it becomes relevant the moment the technology it produced is capable of use in Europe, which for a drug or a diagnostic is the point of developing it. The geography of the laboratory does not determine the geography of the assessment.
On balancing, the Guidelines are candid about who carries the evidential weight. The Art. 6 FSR exercise is performed case by case and only after a distortion has been established, it weighs the distortion against positive effects on the development of the subsidized activity in the internal market and against broader positive effects linked to relevant policy objectives, and it relies on the information submitted to the Commission. The party invoking positive effects is therefore the party that must prove them, and positive effects are less likely to prevail where the subsidy falls within an Art. 5(1) FSR category. What remains unsettled is at least as consequential as what was settled. The Guidelines operate on distortion, balancing, the call-in and procurement. They do not tell a US sponsor whether a generally available federal credit is selective in fact, and that question, which decides whether the company holds a foreign subsidy or merely a large pile of reportable contributions, sits exactly where it sat before.
4. The Call-In Power, and the Case It Is Confused With
Below the thresholds the regime does not stop. Under Art. 21(5) FSR the Commission may, at any time prior to a concentration’s implementation, require the prior notification of a concentration that is not notifiable, where it suspects that foreign subsidies may have been granted to the undertakings concerned in the three years before the transaction.7FSR (n 1), Art. 21(5) (call-in of a non-notifiable concentration at any time prior to implementation), Art. 24 (standstill; 25 working days; 90 working days from the opening of an in-depth investigation, extended by 15 where commitments are offered), Art. 25 (review deadlines), Art. 26 (fines up to 1% of aggregate turnover for incorrect or misleading information, and up to 10% for failure to notify or implementation in breach of Art. 24). The Guidelines set four cumulative conditions on that power and confine it to concentrations with an impact in the Union, assessed on a non-exhaustive list of factors that includes the target’s economic significance, the strategic character of the sector or supply chain, patterns of investment and acquisition, and the Commission’s own earlier decisions. They also describe two safe harbors, neither of which operates unless the Commission can determine, with sufficient certainty and without a notification, that it applies: no call-in where the aggregate of the suspected foreign subsidies does not exceed EUR 4 million over the three years preceding the concentration, and none where those subsidies are aimed at making good damage caused by natural disasters or exceptional occurrences.6
Here the public record is routinely misread, and the misreading travels. As of the date of publication the Commission had not publicly exercised the Art. 21(5) FSR concentration call-in even once. The enforcement action most often described as the regime’s first below-threshold call-in was neither below the thresholds nor a call-in. The in-depth investigation opened on 5 November 2025 into a consortium bid for a Lisbon light-rail contract, in which a Chinese state-owned rolling-stock manufacturer participated as a subcontractor, followed a notification the consortium itself submitted under the public-procurement limb of the Regulation, on procurement thresholds that bear no relation to the concentration thresholds, and it closed with commitments on 21 April 2026.8On 5 November 2025 the Commission opened an in-depth investigation into a Lisbon light-rail bid under the public-procurement limb of FSR (n 1). It followed a notification submitted by the bidding consortium, not an exercise of the Art. 29(8) procurement call-in, and it closed with commitments on 21 April 2026. Art. 28(1) sets the procurement thresholds (EUR 250 million contract value; EUR 4 million per third country), which bear no relation to Art. 20(3). No Art. 21(5) call-in of a concentration had been publicly reported. A power that has never been used against a concentration is not thereby a dormant power, and the Guidelines have described in detail the profile that would attract it: a significant target, a strategic sector, a pattern of acquisitions. Biotechnology is not a marginal sector in any account of European industrial strategy.
The consequences of getting the answer wrong are not calibrated to the innocence of the error. A notifiable concentration may not be implemented before notification, nor for 25 working days after a complete notification is received, nor, where an in-depth investigation is opened, for 90 working days after that opening, extended by 15 working days where the parties offer commitments. Those 90 days run from the opening of the in-depth investigation and not from the notification, a distinction several practitioner summaries collapse and which is worth the 25 working days of the preliminary phase, roughly five weeks, on a longstop date. Art. 26 FSR permits fines of up to 1% of aggregate turnover for intentionally or negligently supplying incorrect or misleading information, and of up to 10% of aggregate turnover for failing to notify a notifiable concentration or for implementing one in breach of the standstill.7 The information in question is the three-year financial-contribution history of every undertaking concerned, assembled by people who do not ordinarily assemble it, and certified to a regulator that can fine a tenth of global turnover if it is wrong. A deal team that concluded, correctly, that the thresholds were not met has not thereby concluded that no filing will be required.
5. Four Clocks, One Signing Date
The FSR does not replace anything. It stacks. A single acquisition of a European biotech by a US buyer can require premerger notification under Hart-Scott-Rodino, notification under the EU Merger Regulation or under one or more national merger-control regimes, clearance under a national foreign-investment screen coordinated but not displaced by the EU screening framework, and an FSR notification.9Council Regulation (EC) No 139/2004 on the control of concentrations between undertakings [2004] OJ L24/1 (EUMR); Regulation (EU) 2019/452 establishing a framework for the screening of foreign direct investments into the Union [2019] OJ L79 I/1 (coordination only; clearance stays with the Member States); Hart-Scott-Rodino Antitrust Improvements Act of 1976, 15 U.S.C. § 18a (30-day waiting period, 15 days for a cash tender offer). Each asks a different legal question. Each runs on its own clock. Two of them are administered by the same Directorate-General of the same Commission, by different case teams, on separate filings that need not clear together.
Observed durations under the FSR are longer than the statutory phases suggest, because pre-notification is where the work happens. On the transactions reviewed to March 2026 the average total notification process ran to roughly five months, with private-equity deals typically clearing in two to four months and deals involving sovereign wealth funds or strategic-sector targets taking ten to fourteen.2 A schedule built on the statutory 25 working days will be wrong, and it will be wrong in the direction that matters to a longstop date.
For a financial sponsor the burden is qualitatively different, because the perimeter is. The contributions to be aggregated are those of the undertakings concerned, which the Commission takes to include the acquiring fund, the investment company managing it and its group, the fund’s investors, and the portfolio companies the acquiring fund controls. Contributions granted to other funds under the same manager with a majority of different investors, and to their portfolio companies, may be excluded only where the notifying party can demonstrate both that the acquiring fund is subject to Directive 2011/61/EU on Alternative Investment Fund Managers, or to equivalent third-country legislation, and that economic and commercial transactions between the funds are non-existent or limited, and the three-year look-back runs from entitlement rather than receipt.5 A sponsor whose portfolio spans a dozen life-sciences companies, each with its own tangle of federal grants and state incentives, is being asked to reconstruct three years of public funding across an entire platform to answer a threshold question about a single deal, and to do it before signing rather than after.
The transaction documents absorb this unevenly. A standstill obligation forces a condition precedent tied specifically to FSR clearance, and longstop dates lengthen to accommodate a clock that does not run with the merger-control clock. The allocation of remedy risk is where the drafting gets genuinely hard, because FSR remedies are not merger-control remedies: the review can examine every financial contribution the parties have received, not only those connected with the transaction, so a commitment extracted under the FSR may reach conduct and financing arrangements that no antitrust remedy would touch. Whether the efforts standard negotiated for antitrust clearance was ever intended to carry that, and whether a material-adverse-change definition drafted before October 2023 captures the imposition of an FSR redressive measure, are questions the documents rarely answer because they were rarely asked.
6. Strategic Considerations for US Biotech Dealmakers
The threshold question is the one most likely to be answered by the wrong function. Who inside a US biotech actually knows the aggregate of every federal, state and foreign public contribution the company has received over three years, measured from entitlement rather than receipt, and has anyone reconciled that figure against the EUR 50 million limb before the term sheet was signed? The finance team holds the numbers, the tax team holds the credits, the business-development team holds the deal, and the analysis requires all three to be in the same room asking a question none of them owns. Where the figure is close to the limb, the further question is what the company would produce if the Commission asked it to prove the number, and how long that production would take.
Beneath the threshold sits a harder question about the call-in. If the safe harbor is EUR 4 million of suspected subsidies over three years, and the Guidelines direct the Commission toward significant targets in strategic sectors with visible acquisition patterns, on what basis would a US acquirer of a European biotech satisfy itself that it sits outside a power that has been described in detail and exercised against no concentration at all? The absence of precedent is not the same thing as the presence of protection, and the profile the Guidelines describe is not a description of an outlier.
Then the characterization question, which no public guidance answers. Is a generally available research credit selective in fact when the industry that claims it is concentrated to the degree that life sciences is concentrated? Is development funding awarded on a public solicitation to a single winner a selective benefit, or a purchase of services at market terms, and does the answer change when the resulting technology is licensed into Europe? These are questions about the company’s own funding history, its contracting posture with US agencies, and its European commercial plans, and they cannot be answered from the outside because the facts that decide them are not public.
A jurisdictional point a US team is least likely to frame for itself: Switzerland is a third country for these purposes exactly as the United States is. Public support flowing to a US biotech’s Swiss subsidiary, whether an Innosuisse innovation grant or cantonal tax relief negotiated as part of a Basel or Zug establishment, is a financial contribution by a third country and counts toward the same EUR 50 million limb, so a European footprint built partly in Switzerland increases the contribution total rather than diluting it. A group that structured its European presence around Switzerland precisely to stand outside Union regulation finds that, for the FSR, standing outside the Union is the condition that brings the money into scope.
Finally, timing. The Commission is required to review its practice under the Regulation and report to the European Parliament and the Council by 13 July 2026, with legislative proposals where it considers them appropriate, and the notification thresholds are among the matters it must review.1 A deal signed against thresholds that are themselves under review, on a filing analysis that turns on the characterization of public funding the Guidelines declined to characterize, is a deal whose regulatory assumptions have a shorter half-life than its longstop date. These questions require analysis tailored to specific facts, funding histories, and commercial context.