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The initiative results from growing concern that openness of European societies is being exploited for covert interference from foreign governments to manipulate decision-making processes and public opinion in the EU. The impact assessment (IA) clearly defines two problems relating to interest representation activities carried out on behalf of third countries: obstacles to the internal market due to fragmented regulation, and the unknown magnitude, trends and actors of these activities. It considers a non-legislative policy option (PO) along with two legislative sub-options, targeting all third countries and all activities carried out on behalf of governments and affiliates. After examining the POs' economic, social and fundamental rights impacts, as well as geopolitical implications, the IA chooses the legislative PO2.1 as the most effective, efficient, coherent and proportionate. PO2.1 seeks to harmonise requirements in the internal market on transparency requirements for entities carrying out interest representation activities on behalf of third-country entities. While the IA expects the initiative to have moderately negative impact on fundamental rights, it justifies this with over-riding public interest and proposes several safeguards. Similarly, regarding possibly negative geopolitical implications, the IA points to differentiating very clearly between the initiative and 'foreign agent laws', and discusses mitigating measures such as diplomatic exchanges and information activities. Economic impacts on entities are expected to be positive, with cost savings from harmonised rules and a levelled playing field expected to compensate compliance costs. The citizens are expected to benefit from improved information, transparency and trust in the democratic system. Nevertheless, the IA's methodology poses some questions concerning the SME test, the use of 'qualitative cost-benefit analysis' to identify economic impacts, and the use of stakeholder views in the analysis.