Eurotunnel is threatening legal action against Brittany Ferries after the French government agreed to grant it a 40m subsidy.
The Anglo-French cross-channel train carrier says the move is illegal.
Eurotunnel Communications Director Dominic Fry said: “We think this stinks. This goes against established rules of European competition. We have lodged complaints with the French as well as the European Commission.”
Fry added that “every option”, including a legal challenge, was being considered by the board. Swedish Ferry company Stena Line has called the move unfair and has also said it would complain to the European Commission.
But Brittany Ferries says the subsidy, which will run over three years, puts the company on a level playing field with other cross-channel carriers.
Brittany Ferries says that it was forced to pay 43 per cent of its staff salaries to the government in insurance or social costs. Companies operating in Britain pay 18 per cent.
It adds that it operates under stricter duty-free purchase laws, as well as historically paying higher port fees in France.
Brittany, which lost 125m last year, told French transport Minister Bernard Pons that the company might have to abandon sailing under the French flag unless help was arranged.