Five Antitrust Takeaways from Vestager’s European Parliament Hearing: Vestager Series, Episode 3
Margrethe Vestager has won the support of the European Parliament for a second term in charge of European competition policy and enforcement, as well as her new role as Executive Vice-President responsible for making “Europe fit for the Digital Age”. This approval came after a three-hour hearing on 8 October, focusing on a range of topics across the spectrum of her new portfolio, from reform of the competition rulebook to artificial intelligence.
1. Two hats don’t sit as easily as one
Coming off the back of a successful five years as the EU antitrust chief, lawmakers expressed little concern with the Commission’s competition credentials – several actively welcomed “Vestager: Season 2”. However, a number were uneasy about the potential conflict of interest between Vestager’s new roles – an independent quasi-judicial enforcer of competition law (not least for the US tech giants) and a political role responsible for making Europe into a digital leader.
Aware of this tension, Vestager made clear from the outset that “independence in law enforcement is non-negotiable”. She reassured the European Parliament that, structurally, the Commission had always featured collegiate decision-making (involving both the Competition Commissioner and those Commissioners with policymaking roles), and that this set-up had previously been found by the European Courts to be compliant with parties’ human rights.
Vestager further justified the dual role by noting that the antitrust enforcement process has extensive checks and balances built into it, whilst the close involvement of the Chief Economist and the Legal Service would ensure a continued focus on ensuring that all decisions will stand up to potential appeals in the European Court (which would scrutinise the legality of any decision).
In approving her nomination, the Parliament seems comfortable that the policymaking benefits of Vestager’s new role outweigh any risks to her independence – but it nevertheless remains an area of concern for non-European tech firms, and one that is likely to be brought up in tense discussions about enforcement.
2. Big data, big tech, big concerns
Digital markets and the role of antitrust enforcement was unsurprisingly a recurring theme throughout the hearing, and gave an indication of where Vestager’s priorities may lie over her second term. In particular, Vestager repeatedly expressed concerns about companies that, having won the competition “for the market”, become “de facto private regulators”, able to set the rules on their platforms. Referencing the three enforcement decisions against Google, Vestager commented that dominant businesses may be incentivised to prioritise their own products, rather than allowing fair competition.
Vestager confirmed that the Commission is examining whether it needs additional powers to take proactive measures where it finds that market structures are undermining fair competition. In particular, she is looking at the powers of the UK competition authority to impose far-reaching remedies following a market investigation (which don’t require an antitrust infringement by any given business).
The role of data was also discussed, and Vestager left open the possibility of widening the concept of market power so as to give greater weight to the role of data. Data is not only a key asset for innovation for those with access to it, but also a barrier to entry for those without such access. Vestager also raised concerns around companies that already have access to significant data sets being able to freely access further data, actively questioning whether publicly-funded data should be available, free of charge, to firms that can afford to pay for it.
3. Breaking up is hard to do – but we’re exploring options
The parliamentarians pressed Vestager repeatedly on whether, in a digital age, competition rules, remedies and processes were up to scratch. Although she conceded that the lengthy timeframes necessary for due process could be a source of frustration, Vestager flagged that the Commission plans to impose “interim measures” on Broadcom later this month (see our Insight on this here), requiring Broadcom to cease the allegedly anticompetitive conduct whilst the Commission investigates. This is the first time in almost 20 years that interim measures have been used, and reflects a growing belief that speeding up enforcement (even on a temporary basis) may be important to avoid long lasting monopolisation of markets.
Quizzed on whether she would sanction a break-up of tech giants, especially Google and Facebook, Vestager confirmed that this was indeed a tool in the Commission’s toolbox. That said, she reiterated her obligation to use the least intrusive tool available to resolve the competition concerns – and noted dryly that breaking up a tech giant was “quite a thing”.
Nevertheless, responding to criticism that US tech giants see the fines as no more than an “operating expense”, she agreed that heavy fines alone were not enough. Instead, Vestager said she would explore whether even stronger remedies were needed in these cases, and that companies may be required to “reinstate competition”. Illustrating her case, she compared the Google cases, noting that two years after Google stopped the infringing conduct in the Google/Adsense case, competition in the market has not picked up. On the other hand, following the Google Android decision, Google changed its conduct and opened up a marketplace that had previously been, due to illegal behaviour, completely occupied by Google.
4. Industrial strategy à la Vestager
Recent months have seen a number of proposed changes to the EU’s antitrust rulebook, most notably Franco-German proposals to change the merger control framework, in order to consider whether the merger may help European companies compete in global markets and against state-funded foreign competitors (following the Siemens/Alstom prohibition). But whilst Vestager’s hearing was full of references to a European industrial strategy to support European firms, it was clear that Vestager’s vision does not align with the Franco-German proposals. Instead, she considers that the key principles underpinning an industrial policy are that it must be (i) green, (ii) for all, and (iii) based on “fair competition”.
Moreover, a “competition-based industrial policy” would not involve changing the principles of competition policy or adapting the regulatory framework: it can be achieved by working more flexibly within the existing competition rules. Most important, for Vestager, is better use of “Projects of Common European Interest” (i.e. cross-EU projects of strategic significance for the EU, of which there are currently two examples, covering microelectronics and batteries).
Vestager also confirmed that the Commission would undertake reviews of its merger control, antitrust and state aid rules, guided by insights into how digitisation affects competition. In particular, Vestager noted that she was considering updating the EU’s horizontal merger assessment guidelines, to make it clearer how the analysis is carried out. However, Vestager was firm that, even under the new industrial strategy, she would make the same prohibition decision on Siemens/Alstom if faced with it again.
5. No backing down on state aid
Just two weeks after the EU General Court annulled the Commission’s state aid decision against Starbucks, and upheld its decision against Fiat, Vestager showed no sign of backing down on applying state aid rules to member states’ tax policies. Indeed, not only did she confirm that the Commission will continue to run state aid cases (with a number currently open), but she also revealed that the Commission had asked member states to explain how they have been using tax rulings in order to update the information currently held by the Commission.
More generally, Vestager was clear that, whilst the state aid decisions shone a light on cases where individual businesses were benefiting from advantageous tax arrangements, these cases wouldn’t be enough to establish a fair tax system, and that this would have to come from legislative change (not least on a digital services tax, either globally or at EU-level).
The European Parliament is due to vote on the proposed College of Commissioners as a whole on 23 October and, assuming a favourable result, the new European Commission will take office on 1 November. However, given that concerns have been raised regarding a couple of the candidates, this could be delayed until suitable replacements are approved by the Parliament.