Illicit subsidies? Brussels is examining the takeover of MediaMarktSaturn

The European Commission has launched an in-depth investigation into the takeover of the parent company of Media Markt and Saturn by the Chinese group JD.com. The preliminary review revealed that “JD.com may have received third-country subsidies that distort the EU's internal market,” the Commission announced on Thursday. These could include tax incentives, favorable financing, and grants from entities “that may be attributable to the People's Republic of China.” The Commission expressed concerns that these alleged subsidies may have given the Chinese group a competitive advantage in the takeover negotiations.

90 days for the investigation

The Commission now has 90 days to investigate whether JD.com was able to make an overvalued bid for Ceconomy due to alleged subsidies. It is also examining whether the planned takeover could have negative effects on the European internal market, according to the Commission's communication.

The investigation is based on a regulation on third-country subsidies, which has been in force since July 12, 2023. It allows Brussels to take action against distortions of competition caused by subsidies. Until October 2, the Commission can now impose conditions on the takeover to eliminate a distortion of competition, prohibit the takeover, or raise no objections.

JD.com apparently expected the move: “We see an in-depth investigation as a standard procedural step for a transaction of this size,” the company told the dpa news agency. In connection with the transaction, the group has not received any state subsidies that could lead to a distortion of competition in the EU. JD.com is in close and constructive dialogue with the European Commission.

No decision from the antitrust authority yet

JD.com had submitted the takeover offer last summer and later secured a majority of Ceconomy shares. According to Ceconomy, France and Italy have given the green light for the takeover. Decisions from Germany, Spain, and Austria are still pending.

MediaMarktSaturn is Europe's largest electronics retailer, with more than 1,000 stores in eleven countries. The online shop ranks fourth in Germany behind Amazon, Otto, and Zalando. Saturn traces its origins back to the Saturn-Hansa store opened in Cologne in 1961, and Media Markt to a MediaMarkt opened in Munich in 1979. There have been several changes of ownership since then; the group has existed in its current form since 2017, and since June 2022, Media-Saturn has been wholly owned by Ceconomy. JD.com, in turn, is China's largest retail group. In March, the group announced its intention to bring its online shop Joybuy to Germany, the UK, France, the Netherlands, Belgium, and Luxembourg.

(mho)