The Government originally notified the EC in October 2007 that it planned to grant the broadcaster £14m to help its switch to digital. The shutdown of analogue terrestrial TV signals began earlier this year and is scheduled for completion in 2012.
However, the Commission said it has "serious doubts" that the planned scheme meets rules regarding the use of public finance to assist private companies.
The Commission said it received a complaint in August 2006 from an unnamed UK commercial broadcaster that objected to financial assistance for Channel 4, on the grounds that it "has ample and sufficient cash reserves to meet the costs of digital switchover, without any need for public support".
The Commission noted the information provided so far by the UK Government "does not enable the commission to assess whether, given the costs of its digital switchover obligations, and taking into account its commercial revenues, C4 will have, in the short term, a net public service cost which would allow it to receive state aid".
Competition commissioner Neelie Kroes said: "The commission is firmly committed to encouraging the digital switchover process, which has many advantages for consumers and innovation. However, it needs to make sure that any state support does not distort competition unduly."
A Channel 4 spokesman said: "This is a step we always recognised the Commission might decide to include in the process. As their statement makes clear, this is a specific proposal to examine the Government's plan to fund Channel 4's switchover costs and they do not oppose state funding for broadcasters in principle."
A DCMS spokesperson said: "The Government considered it appropriate to give Channel 4 short term support for capital costs to support delivery of public service broadcasting during digital switchover. This was always subject to [European Commission] approval. We note the Commission's decision and will of course cooperate fully with any requests for information."
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