​Vestager pledges to tame tech's 'dark side' in second EU mandate

28 November 2019 8:27am

27 November 2019, by Lewis Crofts and Nicholas Hirst

After five years at the helm of the European Commission’s powerful antitrust watchdog, Margrethe Vestager still has unfinished business. 

She sees her new mandate — as a top-tier “executive vice-president” overseeing digital regulation and competition enforcement — as an opportunity to put humans at the heart of technology. Her mandate will be heavy on broader policymaking while keeping up with cartel and antitrust enforcement, all informed by five years of experience taking on Big Tech. 

In a wide-ranging interview with MLex, the incoming commissioner spoke of coupling her existing powers to investigate with her new powers to regulate. Her goal is to harness technology’s potential to help transportation, healthcare, services and the environment — while tempering its excesses. 

“It would be amazing if we could tame some of the dark side, while not impeding or shrinking the potential that technology holds,” she said, saying a “world community of law enforcers” is rising to the challenge.

With the EU’s new top table of commissioners approved today, Ursula von der Leyen, the president-elect, has already asked Vestager to oversee what is likely to be a major reform of digital platforms’ liabilities, as well as initiatives on artificial intelligence and digital tax. 

There’s no sense of fatigue after her first five years in Brussels. “This is what I do. I wouldn’t want it any other way,” she said. “I love it.”

Policy-heavy mandate

If her first mandate was defined by a string of headline-grabbing sanctions — reprimands for the likes of Google, Apple and the auto industry — debate over whether EU rules are fit for the 21st century may well dominate the second.

“This mandate will not be the same as the first one, because, in itself, you have much more policy work,” she said. “A lot of things call for more policy.”

That includes revisions of two technical but important antitrust rulebooks — one for product distribution, the other regulating how rivals co-operate on research — both of which are close to expiry. They could provoke scraps between the likes of Amazon and Adidas, or patent holders and patent users.

What’s more, the rules and guidelines for agriculture, shipping and vehicles are up for revision, while the commission wants to better align state aid policy with wider priorities on climate change and EU funds.

Then there is the wider and increasingly political debate of how to deal with the market power of US Internet giants such as Google and Amazon, and of industrial champions from China.

Vestager has already indicated her opposition to bending the rules to foster European champions. And at the end of her first mandate, she has yet to set out what changes are needed to the competition rules to better deal with Big Tech.

“The question is, of course, well, how do we reinterpret so that, also, the concept of not to misuse your dominant position is also fit for the digital age,” she says. “Here, we have not concluded yet.”

Options include making greater use of interim measures or finding a way to soften the standard of proof for intervention in antitrust cases, coupled with a greater responsibility for abusers to repair the damage they have done.

In parallel, Vestager has no shortage of early-stage antitrust inquiries to test what she can do with the existing rules. “We are asking questions left, right and center to Apple and Facebook,” she noted.

Consumers, citizens, humans

In the antitrust world of pinstriped executives and straight-laced lawyers, Vestager is famed for her apparently easygoing manner. More than any other commissioner before, her message has gotten beyond the enforcer’s citadel in Brussels and cut through to citizens.

Barely a month passes without a magazine profile reeling off her office paraphernalia as a proxy for the Danish politician’s mindset. For every one of those front-page splashes lauding the “Slayer of Silicon Valley,” the companies caught in the cogs of enforcement groan: there is no way they can win the media battle against this lady.

Part of her success rests on the narrative of “fairness” — a mantra that distilled the quintessence of competition law into a single word. Where other commissioners had talked of “well-functioning markets” or “competition-driven innovation,” Vestager crystallized an idea: consumers, companies and taxpayers should be treated fairly.

Plenty objected. Free markets can be unfair, they said. But that was to overthink it. For Vestager and her staff, it was always about outcomes — making consumers feel they are treated fairly — not a gauge for intervention.

The fairness mantra will continue, but you can also expect to hear more about “humans.” Some Vestager speeches earlier this year already hinted at broader social concerns beyond competitive markets, such as technology’s impact on democracy, freedom of speech and fake news. In her new role, overseeing digital regulation, she is well placed to grasp those nettles.

“The market should serve consumers, and society should serve citizens, and technology should serve humans,” she said. “For me, humans still come first, so it has to be about humans [and] how we live.”

Vestager’s boss, Von der Leyen, is speaking the same language. Presenting her new executive today, she set out plans for Europe to harness technology: “We put people in the center. Not the market and money.”

Two become one

After being re-awarded the competition portfolio to an audible gasp from the assembled journalists (“It was fun, wasn’t it,” she quips), Vestager is well set to leave an unprecedented mark on the competition portfolio and the tech sector more broadly.

Competition commissioners usually get only a single mandate. And that suits them. They pick fights with the world’s largest companies, break new ground with neoteric legal theories, and wallow in the billions they harvest for the EU’s coffers. After that, they shuffle off the stage and have their feet up by the time EU judges fillet their decisions and chastise the executive for overreach.

Vestager is not only breaking new ground with a second term: She is also taking on broader policymaking responsibilities, provoking questions about the separation of powers. Center-right politicians in particular, backed by voices in business and law, question how she can be both an independent arbiter of investigations and a politically minded vice-president pushing Europe’s technology interests on the global stage. 

In response, Vestager has banged home the message that law enforcement shall not be besmirched. It is a quasi-judicial role whose integrity is guaranteed by the courts, she claims. If anything, her argument runs, the philosophy of competition enforcement may pare back impulses elsewhere to protect European industries or over-regulate, not vice versa. 

Nonetheless, corporate lawyers will balk at Vestager’s plans to get her competition services involved in policy proposals. 

In particular, she wants to crack open the first-hand experience gained by investigators and use it to underpin legislation: “What they know about a specific market, once they have done a merger, or an antitrust inquiry, [whether] that be a cartel or a misuse of government position, this [knowledge] is literally hands-on.” 

Vestager’s insistence that any information shared between divisions — the exact interface, she said, has yet to be designed — will be “generalized” is unlikely to fully reassure companies sharing business secrets with investigators.

Unfinished business

In one sense, Vestager’s second term makes her more accountable than her predecessors: She will still be in office when the bloc’s top judges dispense justice for or against the likes of Qualcomm, Google and Apple. But while danger might lurk in Luxembourg, Vestager’s second mandate also gives her a unique opportunity to settle some unfinished business — a gauntlet she seems willing to take up.

She points to three areas where her team has made a start: cartel busting, a review of enforcement powers in digital markets, and learning the lessons of a decade spent investigating and fining Google. It will take time before that work “takes full effect,” she says.

Arresting the decline in leniency applications by “increasing the risk of you being caught” is the essence for Vestager. She pointed to moves to create a network of law enforcers and police services that could share information and tips with competition officials, as well as the creation of a unit of cartel investigators dedicated to “market surveillance” and unearthing indications of possible collusion.

With her sights trained on taming the tech giants, will she have enough bandwidth to pursue such humdrum and knotty matters? Only time will tell.

As evidence of ongoing cartel work, she cited a probe into BMW, Volkswagen and Daimler over collusion in technical working groups. She also identified a need to be “more direct ... in giving advice on what is a cartel” and what is cooperation — “so that we will not come knocking and ask for a copy of all of your servers.”

Vestager also mentioned a review of competition policy for digital markets, published in February by three academic advisors, as requiring follow-up. It includes suggestions for greater scrutiny of large tech companies acquiring smaller startups — deals known as “killer acquisitions” — and raises questions over whether the hurdle is too high for investigators to prove certain abuses.

The commissioner notes, in passing, that a recent decision to put an interim block on Broadcom from using certain contract terms in selling chips featured a “very high standard [of proof].”

And Google. With three multi-billion euro fines already booked, you could forgive Vestager for wanting to move on to the likes of Facebook, Apple and Amazon. But “it’s not really done yet,” she warns.

Beyond the metrics of clicks and traffic, Vestager says the Google probes have taught her that such cases have three slices: a fine for past conduct; an immediate order to stop; and potentially a “restorative element” to help competition come back from the wilderness.

“This last part is much more work in progress, and comes from the fact that these markets are very different from what we knew before,” she says, in a nod to digital markets’ extraordinary economies of scale and capacity to expand rapidly.

Need for speed

Vestager is all too aware of the mismatch between Brussels procedures and fleet-footed tech companies. Her staff, she says, would claim she’s “obsessed with speed.” She talks of “harvesting” a couple of days here, a week there, during investigations, while respecting the straitjacket of procedural law. But it’s clear she’s irked by the imbalance between the way she can advance a probe and the defense tactics of some companies.

“One of the things I have learned is that every rule can be gamed,” she says. “Every rule can be taken to court. Every rule can be complained about.”

While this is “completely legitimate,” the commissioner talks of an “asymmetry between those we suspect of having broken the law and the law enforcer, because the law enforcers shouldn’t ever use the same tools.”

Team discipline

Sensitive to the complications of her powerful new portfolio, Vestager has taken steps in her own expanded team to guard against claims of conflicts or procedural shortcuts.

While most of her competition advisers will stay on, the cabinet will see their case work kept separate from other officials counseling Vestager on digital policy. Also, the commissioner is keen for a shakeup to ensure newcomers find their feet — an aim helped by her whole team moving premises up a floor or two, as Vestager’s office rises in keeping with her position.

“We have a number of people coming from the old cabinet, and then new people coming on board. We don't want just for the old cabinet to be the home of everything, and then for new people to just have to integrate and learn our ways, and habits, and whatever we do. We want it to be a new team.”

Meanwhile in DG Competition, effectively Vestager’s ministry, three of the top four posts haven’t been permanently filled. They are occupied by the most experienced and seasoned officials, but none of them has yet been formally appointed. Vestager’s picks are closely watched by Brussels insiders and will likely define the tenor and content of her next five years in office.

Does she have plans for who will land those jobs? “I have, and I will not share them with you,” she says, unusually curt.

World community of law enforcers

Vestager and her staff have enjoyed splendid isolation in their pursuit of big tech over the last five years. By and large, other regulators have landed only glancing blows on the likes of Google and Qualcomm, but she has hit harder with billions of euros in fines and curbs on their business practices. 

Unsurprisingly, the rest of the world has now woken up. US regulators are throwing the book at Google, Facebook and Amazon, with scrutiny ranging from smaller state-level enforcers to the highest political ranks of Washington DC. Meanwhile, Australian officials have been at the vanguard of rethinking regulation for the 21st century. And Asian authorities are taking bites out of local as well as international players. 

“It takes a world community of law enforcers to get this right,” Vestager says, shrugging off suggestions that divergent outcomes might make the journey more bumpy. “The mere fact that now everyone is looking at this: that changes the game.”

While the US has long thrown barbs at Europe for taking on its successful companies, some presidential candidates have swung back the other way, with Democratic hopefuls Elizabeth Warren and Bernie Sanders notably calling for the dismemberment of Amazon and Google — something that goes too far even for Vestager. 

“If you divide something in two, you may just have two giants, instead of one. If you divide that again, you may have four giants, instead of one. The question is, of course, what is it that you want to achieve?”

Move fast and regulate things

Talk of the “dark side” of digital and warnings of Big Tech’s risk to competition and society are par for the course for Vestager.

Whether those concerns are best addressed through antitrust enforcement or outright regulation — or more likely a mix of the two — remains an open question.

One mandate in, Vestager still appears undecided about the path forward for overhauling the competition rules. And the next mandate of rulemaking will see her line up against EU governments and members of the European Parliament in creating new legislation.

She will need to move fast: As she is all too aware, there is only so much that the clunking Brussels machinery can achieve in five years.