Foreign subsidies, which can take the form of direct subsidies, grants, loans (including below-market loans), loan guarantees, tax concessions, preferential government procurement policies, or government ownership or control, can distort the competitive process by enabling the subsidized firm to submit a bid higher than other firms in the market, or otherwise change the incentives of the firm in ways that undermine competition following an acquisition.

Foreign subsidies are particularly problematic when granted by countries or entities that constitute a strategic or economic threat to United States interests.

The Made in China 2025 plan, states that the Chinese Communist Party will ‘support enterprises to carry out mergers and acquisitions (M&A), equity investment, and venture capital overseas’.

The 2020 report to Congress from the bipartisan U.S.-China Economic and Security Review Commission concluded that the Chinese Government subsidizes companies with a goal of their expanding into the United States and other countries, finding that ‘[t]his process assists Chinese national champions in surpassing and supplanting global market leaders’. The report warns that the risk is particularly acute when it comes to emerging technologies, where China seeks to ‘surpass and displace the United States altogether [and that] [f]ailure to appreciate the gravity of this challenge and defend U.S. competitiveness would be dire … [and] risks setting back U.S. economic and technological progress for decades’.

In remarks before the Hudson Institute on December 8, 2020, FTC Commissioner Noah Phillips stated, ‘[O]ne area where antitrust needs to reckon with the strategic interests of other nations is when we scrutinize mergers or conduct involving state-owned entities … companies that are controlled, to varying degrees, by the state … [and] often are a government tool for implementing industrial policies or to protect national security’.