JD.com’s $2.5bn (£2bn) bid for German electronics retailer Ceconomy is facing an in-depth investigation by European Union regulators over concerns that the deal may involve Chinese state subsidies.

The European Commission said on Thursday that its preliminary probe indicated JD.com may have received foreign subsidies that could distort the EU internal market.

The deal would give the Chinese ecommerce giant control of Ceconomy-owned electronics retailers MediaMarkt and Saturn, handing it a major foothold in Europe’s consumer electronics market.

The Commission said the potential subsidies included preferential financing, tax incentives and grants provided by entities that may be linked to the People’s Republic of China.

It warned that such support could have helped JD.com offer a higher price for Ceconomy, while also strengthening the German retailer’s activities and growth through JD.com’s technology and logistics capabilities.

The probe marks the first full-scale EU investigation into a Chinese deal under the bloc’s Foreign Subsidies Regulation, which is designed to tackle unfair foreign state aid in acquisitions and public procurement.

The regulation gives Brussels the power to demand concessions from companies if it finds that foreign subsidies have distorted competition within the EU.

JD.com rejected the Commission’s concerns and insisted the acquisition would not be funded by Chinese state support.

A spokesperson said: “The proposed acquisition of Ceconomy AG by JD.com will not be financed by any foreign subsidies granted by China or any other non-EU Member State, but instead is funded by external private bank debt and available cash from ordinary course business activities.”

The Commission has set an October 2 deadline for its decision.

If approved, the acquisition would represent a major international expansion move for JD.com, one of China’s largest retailers, as it looks to build its presence beyond its domestic market.

Ceconomy operates some of Europe’s best-known electronics chains through MediaMarkt and Saturn, giving JD.com access to a large bricks-and-mortar and online retail network across the region.

The investigation comes as Brussels intensifies scrutiny of Chinese-linked retail and ecommerce businesses.

The Commission has already stepped up enforcement against fast-growing online platforms such as Temu, Shein and AliExpress amid concerns over unsafe products, low-value imports and market distortion.