Addressing the impact of foreign state-owned companies: Implications for fair and effective merger control

Annika Stöhr and Oliver Budzinski

No 200, Ilmenau Economics Discussion Papers from Ilmenau University of Technology, Institute of Economics

Abstract: State-owned firms from third countries play an increasingly significant role in international mergers and acquisitions, raising concerns about distortions of competition. These distortions arise from state-backed financial advantages, preferential treatment, and industrial policy objectives, potentially undermining market competition. This paper categorises different forms of competitive distortions, focusing on acquisitions financed by foreign state resources. Through an analysis of German and EU merger control cases (2012-2023), we assess the extent of this phenomenon and the treatment of such transactions by the respective competition authorities. While direct state involvement remains rare, it is prevalent in strategic industries such as energy and transport. We discuss potential policy responses, including expanded notification requirements, revised theories of harm, and stricter intervention criteria. However, we caution against excessive regulatory overreach that could lead to protectionist distortions. Our findings advocate for a nuanced approach to merger control that ensures competitive neutrality while safeguarding against state-driven market distortions.

Keywords: competition policy; state-owned enterprises; merger control; foreign subsidies; EU competition law (search for similar items in EconPapers)
JEL-codes: K21 L40 L44 L50 (search for similar items in EconPapers)
Date: 2025
New Economics Papers: this item is included in nep-com, nep-eec, nep-law and nep-reg
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:tuiedp:335042

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