Italian state support for the Ilva steelworks
The EU is the second-largest steel producer in the world, generating around 177 million tons every year at some 500 sites in 23 member states.
But the sector has been hit by worldwide overcapacity and stiff global competition, and EU rules as a result do not allow governments to support steel manufacturers in financial difficulties.
The commission has now received several complaints about state measures "aimed at keeping Ilva afloat artificially" - something that would be illegal under the EU competition rules.
It launched an investigation Wednesday into the allegations relating to the steel giant, located in the southern Italian region of Taranto.
"The best guarantee for a sustainable future of steel production in the Taranto region is the sale of Ilva's assets to a buyer thatupgrades them in line with environmental standards and runs them for productive use," said EU Competition Commissioner Margrethe Vestager.
The investigation relates to around 2 billion euros (2.2 billion dollars) of funding, the EU's executive said. This includes state guarantees on loans, access to funds seized during criminal proceedings against Ilva shareholders, among other things.
Italy is already in trouble for failing to curb pollution at Ilva, with commission proceedings underway since 2013.
At full capacity, the steel manufacturer could manufacture as much steel as the joint production of Bulgaria, Greece, Hungary, Croatia, Slovenia, Romania, and Luxembourg in 2015, according to the EU's executive.
Also Monday, the commission said that Belgium must recover 211 million euros in illegal state aid granted to several steel companies in the Duferco group between 2006 and 2011.
"Despite the illegal state aid to Duferco the company has now withdrawn almost all business activities from Belgium," Vestager noted.
"The case shows that state aid to artificially keep steel manufacturers afloat that are not viable seriously distorts competition and only delays their exit from the market at the cost oftaxpayers," she added.