NEWSTALK has complained to Europe over RTE's use of the licence fee.
The independent broadcaster said that RTE's commercial activities are "not being carried out on market terms".
The move follows RTE's decision to refuse to accept advertising revenue from Newstalk.
A spokesman for the radio station said RTE is using what amounts to a state subsidy to "aggressively'' undercut its competitors.
It has now lodged a formal complaint with the EU Commission on the matter.
The complaint says that government funding by way of the licence fee is "illegal" because the state broadcaster is using the money raised in a way that is contrary to EU rules.
It is now seeking urgent intervention from the European competition watchdog on the basis that RTE's commercial activities are artificially distorting the market.
"In examining the case we made to the Competition Authority, it emerged that RTE, in our view, is using licence fee money to subsidise their commercial activities, which is discriminating against us," said Newstalk chief executive Gerard Whelan.
It also alleged that the aid RTE receives in the form of TV licence fees is breaching EU state aid rules.
An RTE spokesman said it believes it is fully compliant with the Broadcasting Act 2009.