Commission conditionally approves JD.com’s acquisition of CECONOMY under the Foreign Subsidies Regulation

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The European Commission has approved, under the Foreign Subsidies Regulation (‘FSR’), the acquisition of CECONOMY AG (‘CECONOMY‘) by JD.com, Inc. (‘JD.com‘). The approval is conditional upon full compliance with the commitments offered by the parties.

Today’s decision follows the opening of an in-depth investigation into the proposed acquisition and the sending of a Statement of Grounds.

JD.com, headquartered in the Cayman Islands, is a holding company listed on the Nasdaq and the Hong Kong Stock Exchange, heading a group operating a retail business and an e-commerce marketplace in the People’s Republic of China (‘PRC’), as well as providing logistic and technological solutions.

CECONOMY, headquartered in Germany, is a retail company specialised in the field of consumer electronics and home appliances. Its main brands are MediaMarkt, MediaWorld and Saturn, which operate online and brick-and-mortar retail businesses in several Member States.

The Commission’s findings

During its in-depth investigation, the Commission gathered further information from the parties, as well as feedback from the parties’ competitors, and found that:

• JD.com received subsidies in the form of preferential financing, tax incentives and grants from the PRC that are liable to distort the internal market.
• The identified foreign subsidies could lead to a potential distortion of competition in the EU internal market with respect to the combined entity’s activities after the transaction. In particular, the Commission found that the identified foreign subsidies contributed to logistic and technological capabilities that would be provided to CECONOMY after the transaction.
• The identified foreign subsidies could improve JD.com’s and CECONOMY’s capacity to finance activities in the internal market and engage in aggressive pricing to the detriment of other market participants.

The proposed remedies

To address the Commission’s competition concerns, the parties offered:

• To conduct intra-group transactions between JD.com and CECONOMY on market terms, including financing provided by JD.com to CECONOMY;
• To provide JD.com’s warehousing and logistic services to third-party retailers on the same terms as those provided to CECONOMY;
• To provide JD.com’s technology services to third parties on the same terms as those provided to CECONOMY.

Based on feedback received during a market test of the proposed remedies, the parties addressed the main shortcomings identified by the competitors, strengthened their commitments related to intra-group transactions and financing by JD.com to CECONOMY, and improved the terms and conditions under which the logistic and technology services are provided to third parties.

The Commission found that these commitments fully and effectively remedy the distortion resulting from the identified foreign subsidies, by preventing cross-subsidisation from JD.com to CECONOMY and eliminating the combined entity’s competitive advantage resulting from JD.com’s subsidised logistic and technological capabilities.

The Commitments are valid for 10 years.

The decision is conditional upon full compliance with the commitments. An independent trustee will monitor their implementation under the supervision of the Commission.

The procedure under the Foreign Subsidies Regulation

The FSR started to apply on 12 July 2023. The FSR enables the Commission to address distortions caused by foreign subsidies and thereby allows the EU to ensure a level playing field for all companies operating in the internal market while remaining open to trade and investment.

According to the FSR, companies must notify concentrations to the Commission when at least one of the merging companies, the acquired company or the joint venture is established in the EU and generates an EU turnover of at least €500 million, and when the parties were granted at least €50 million in combined aggregate foreign financial contributions from third countries in the three years prior to the concentration.

By the end of its in-depth investigation, the Commission may (i) accept commitments proposed by the company if they fully and effectively remedy the distortion, (ii) prohibit the concentration, or (iii) issue a no-objection decision.

For more information

More information will be made available under the case number FS.100253 in the public case register on the Commission’s competition website, once any confidentiality issues have been resolved.