The European Commission has conditionally approved JD.com’s acquisition of German consumer electronics retailer CECONOMY under the EU’s Foreign Subsidies Regulation, subject to a package of commitments.

The decision follows an in-depth investigation into the deal and a formal Statement of Grounds sent to the parties, the Commission said in a statement on Tuesday.

JD.com is a holding company listed on Nasdaq and the Hong Kong Stock Exchange and runs retail and e-commerce operations in China as well as logistics and technology services.

CECONOMY is based in Germany and operates consumer electronics and home appliance retail businesses in several EU countries under brands including MediaMarkt, MediaWorld and Saturn.

During its investigation, the Commission found JD.com received subsidies from China in the form of preferential financing, tax incentives and grants that were liable to distort the EU’s internal market.

The Commission said these subsidies contributed to JD.com’s logistics and technology capabilities that would be provided to CECONOMY after the transaction.

It also found the subsidies could improve the companies’ capacity to finance activities in the EU and engage in aggressive pricing “to the detriment of other market participants.”

Commitments and monitoring

To address those concerns, the parties offered commitments including conducting transactions between JD.com and CECONOMY on market terms — including any financing provided by JD.com — and offering JD.com’s warehousing, logistics and technology services to third-party retailers on the same terms as those offered to CECONOMY.

The commitments were strengthened after a market test that gathered feedback from competitors.

The Commission said the final package would prevent cross-subsidisation from JD.com to CECONOMY and remove any advantage linked to subsidised logistics and technology capabilities.

The commitments will apply for 10 years and compliance will be monitored by an independent trustee under Commission supervision.

The Foreign Subsidies Regulation, which started applying on 12 July 2023, gives the Commission powers to tackle distortions caused by subsidies granted by non-EU governments.

Teresa Ribera, the Commission’s Executive Vice-President for Clean, Just and Competitive Transition, said the commitments addressed the identified foreign subsidies and their potential distortive effects, including by preventing cross-subsidisation of the parties’ European operations.