Kroes’s potential antitrust conflicts surface in broken promises, lost files

31 January 2017 9:54am
Neelie Kroes

First published on MLex 28 November 2016. By Lewis Crofts.

Neelie Kroes has broken a categorical promise to the European Commission that she wouldn’t engage in “any business activity” after her term as the EU’s antitrust chief, documents obtained by MLex show.

Kroes, who imposed billions of euros in fines against companies including Microsoft, Intel and Saint-Gobain during her tenure, joined Uber and this year — contradicting a written commitment she made to the commission in 2004.

Internal commission documents shed new light on two kinds of commitments the Dutch politician made before taking up the competition post in Brussels. One dealt with how she would handle potential conflicts while serving as antitrust chief; the other related to her behavior after leaving office.

The paper trail offers no evidence that Kroes made any decision as competition commissioner affecting companies to which she had been previously linked. But the documents offer a glimpse into how she sought to handle concerns that European lawmakers had raised about her independence from powerful corporations.

They show that Kroes’s offer to address potential conflicts didn’t tally with the commission’s internal legal advice. Further complicating the picture, EU officials have lost documents drawn up in 2004 to catalog her business interests as well as an internal study on potential conflicts. That missing evidence may complicate a commission investigation into holes in Kroes’s account of her time in the top competition job between November 2004 and February 2010.

A European Commission spokesperson said the events were handled by a previous administration 12 years ago: “So, in principle, we do not have any comment.”

Life after leaving

The current business activities of Kroes and former European Commission President José Manuel Barroso — who joined Goldman Sachs Group in July — have brought scorn on the commission, which is accused of doing nothing to stop the revolving door that allows ex-commissioners to accept lucrative jobs as lobbyists after they leave office.

Stung by the backlash, the commission last week announced a plan to overhaul its code of conduct, which guides its handling of commissioners’ conflicts of interest.

For Kroes, the most crucial question in 2004 was how her years as a corporate director and adviser would affect her impartiality as a competition enforcer.

Lawmakers had voiced concerns that her past involvement with companies — including Lucent Technologies, shipper Royal P&O Nedlloyd and Dutch construction company Ballast Nedam — would be an obstacle to winning approval from the European Parliament.

Kroes wrote to Barroso on Sept. 17, 2004, seeking to knock out those concerns with a straightforward promise on her own initiative.

“I hereby commit not to engage into [sic] any business activity following the end of my term as Competition Commissioner,” she wrote to Barroso.

Kroes got the job and went on to serve a second term at the commission as the EU’s telecom chief. But a year after leaving the bloc’s executive branch in late 2014, she became special adviser to Bank of America Merrill Lynch.

This year, she became a director at and joined Uber’s public-policy advisory board. In these roles, she has become a vocal critic, slamming an EU decision — taken by the department she once oversaw — that ordered Ireland to claw back 13 billion euros ($13.8 billion) in unpaid taxes from iPhone maker Apple. She warned that Margrethe Vestager, the current competition commissioner, was changing “the rules of the game.”

In the same month, Oscar Hammerstein, a lawyer for the Dutch politician, told the press his client “no longer felt bound” by the earlier commitment to Barroso because she went on to be the commissioner in charge of telecom and digital policy.

Kroes’s lawyer declined to comment for this article.

Conflict management

Kroes’s promise not to return to business was her own unprompted decision. But two weeks before she made that commitment the commission’s top in-house lawyer at the time, Michel Petite, advised Kroes to spell out — in a “written undertaking” to Barroso — details on how she would avoid conflicts of interest when taking action against businesses.

A conflict of interest was a particular risk when targeting companies and conduct that overlapped with the period of her employment, Petite wrote. The commissioner could be called upon to “rule upon herself,” he said.

But Petite also suggested Kroes apply the “same treatment” to corporate activities that occurred after she was employed by the companies in question or for decisions affecting potential rivals of those employers. Although such situations might not present a conflict of interest in law, circumstances could arise where recusal would be advisable, he wrote.

In Kroes’s subsequent letter to Barroso, she recused herself from the first category of decisions, handing the decision-making power over to the president or a designated commissioner.

But for companies involved in competition issues for periods when she wasn’t employed, she said she would recuse herself for only the first year of her mandate as competition commissioner.

Petite, who is himself now an adviser to law firm Clifford Chance, never suggested — or even mentioned — this one-year cutoff in his letter. Petite didn’t respond to a request to comment for this article.

Kroes’s subsequent letter to Barroso was also silent on the suggestion that she should recuse herself on decisions relating to rivals of her previous employers.

Petite’s legal opinion said such situations may be “exceptional.” But he highlighted the awkward scenario where Kroes might have been employed by one company in a duopoly and, as a commissioner, would be called upon to rule on the other.

Her promise to put in place strict rules on handling sensitive dossiers played a crucial part in winning the approval of EU parliamentarians who vetted her for the commissioner’s post.

Bahamas backwash

The question of Kroes’s business interests came to the fore again this September, when confidential documents relating to offshore tax entities showed she had been involved with a Bahamian company called Mint Holdings from 2000 to 2009.

Code of conduct rules require commissioners to declare outside interests. Already, in 2004, Kroes was found not to have listed work she had done for arms manufacturer Lockheed Martin, despite having declared around 60 other positions.

Mint Holdings — an investment vehicle that planned to buy Enron assets — has now been exposed as a further hole in that original list.

Kroes’s lawyer has called this an oversight, saying his client “acted in good faith.”

Missing documents

Following the Mint Holdings disclosure, Jean-Claude Juncker, the current commission president, ordered an ethics committee to probe what Kroes declared — and when — to see if she had broken code of conduct rules.

But that review will have to proceed without a crucial document that set out her initial declaration of interests.

When Kroes wrote to Barroso in 2004 to make her promise not to return to business, she included an annex setting out a “full account” of her business activities.

The commission told MLex earlier this month that the annex “has not been found” — “despite extensive research” in the commission’s archives.

Officials in the antitrust department also reviewed potential conflicts of interest before Kroes’s appointment, comparing her business connections with thousands of investigations.

Kroes would have been barred from ruling on 35 cases over the previous five years, it was reported at the time.

MLex requested a copy of that document but was again told that despite “extensive” searches across commission departments and staff, past and present, the document hadn’t been found.

A European Commission spokesperson pointed to Juncker’s proposal last week to tighten the Code of Conduct by extending the “cooling off” period from 18 months to two years for commissioners.

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