Nuctech, a Chinese state-owned security equipment maker, is being investigated by the European Union as regulators worry the subsidies granted by Beijing may give the company an unfair edge over its European competitors.

The European Commission has initiated an in-depth investigation into Nuctech to “carefully assess if any foreign support to Nuctech has distorted competition in the EU,” Executive Vice President Teresa Ribera said in a statement on Dec. 11.

Preliminary findings from the Commission suggested that a number of measures granted by Beijing to Nuctech may constitute foreign subsidies, which could be “grants, preferential tax measures, and preferential financing in the form of loans,” the executive body said.

The Commission has expressed concerns that the foreign subsidies “may have improved Nuctech’s competitive position in the internal market and may have negatively affected competition.”

The probe followed the Commission’s unannounced inspections of Nuctech’s facilities in Poland and the Netherlands in April 2024, over which the Beijing-based company had sued the Commission at the General Court in Luxembourg, Europe’s second-highest court.

Nuctech didn’t respond to a request for comment by publication time.

Nuctech provides security equipment—such as X-ray scanners, explosive detectors, and thermographic cameras—and related services for airports, ports, and customs points in railways and roads at borders worldwide.

Ribera, the bloc’s antitrust chief, said this is the first investigation under the EU’s Foreign Subsidies Regulation.

“Threat detection systems, including security and inspection scanners used at ports and airports, play an essential role in ensuring that Europe is open, yet secure,” Ribera said in a statement.

“So we want a level playing field on the market for such systems, keeping fair opportunities for competitors, customers such as border authorities.”

Companies found guilty of breaching the Foreign Subsidies Regulation risk fines as much as 10 percent of their global revenue.

Founded in 1997 by the son of former Chinese leader Hu Jintao, Nuctech has long faced scrutiny in Western nations over its ties to the Chinese regime and its military. There are concerns that sensitive personal data collected by the company’s screener system could end up in the hands of the Chinese Communist Party.

The U.S. Commerce Department added the company to its trade blacklist in 2020 over national security concerns.

Canada’s government awarded Nuctech a $6.8 million contract to provide security equipment for 170 Canadian embassies, consulates, and high commissions worldwide in 2020. However, public backlash erupted after the deal was made public, leading to its eventual cancellation.

Nuctech has also been embroiled in allegations of unfair business practices and corruption, including multiple bribery accusations in Taiwan and Namibia.

Reuters contributed to this report.