Breakfast with the woman who sued Google
“Do markets serve the interests of consumers?”- that was the question posed by Margrethe Vestager, EU Commissioner for Competition, at a breakfast briefing hosted by the European Policy Centre, in front of an audience which included the former President of the European Council, Herman Van Rompuy.
As befits the remit of a politician recently described as “the rich world’s most powerful trustbuster”, the scope of the Commissioner’s talk was broad, covering everything from the need to ensure that the benefits of globalization are shared widely, to the need to ensure that protecting innovation remains central to competition policy. It also tackled the difficulties of applying traditional tax rules to digital operations and, inevitably, there was discussion of the recent ultra-high profile competition cases brought by the Commission against Intel, Google and Gazprom.
On the interconnectedness of the world economy, the Commissioner noted that, in order to make markets work, regulators have to intervene to ensure that successful companies do not then use that success to block innovation which would allow other, competitor, companies to eventually be as successful. It was stressed that when a company grows too big to be constrained by a national market then the burden of preventing anti-competitive behavior passes to the trans-national stage.
The theme of interconnectivity and the need for international bodies to work more closely together to tackle global problems was returned to more than once by Vestager in the course of her speech. In a nod to her fellow Commissioner Pierre Muscovici, she highlighted the recent initiatives of the Commission in tackling international tax avoidance and ‘base erosion’, such as the automatic exchange between Member States of tax rulings – which came into effect at the beginning of this year – and the current proposals that would impose a duty to report potentially ‘aggressive’ cross border tax schemes on intermediaries such as tax advisors, accountants and lawyers.
For most of the audience, the suspected draw of the briefing was the chance to hear the Commissioner discuss the competition actions brought against U.S. tech companies. They may, however, have left disappointed; by and large, Vestager deflected efforts to be drawn on specific details on the Intel case – simply stating that the matter would be reviewed by the General Court, who would need to look further into the substance of the decision “as will I”. On Google, she was less reticent, noting that whilst its pioneering search engine had delivered real benefits to consumers, the company’s promotion of its own price comparison service (by prioritising it in google search results) was an abuse of dominant position. After all, the Commissioner asked the audience; “who ever looks at page four of the search results? Who even looks at page 2?”
Another topic addressed under the rubric of State aid was the screening of foreign investment, as announced by President Juncker in his recent ‘State of the Union’ speech. Pointing to the delicate balance that needed to be drawn between encouraging growth and maintaining security, the Commissioner remarked that “an economy as complex as ours can also be fragile”, that it needs to be safe from cyber-attacks, and that key raw materials need to be protected. Reference was made to the fact that both Australia and the USA commonly screen foreign investment in this way, but Vestager was clear that screening “does not mean European owned.” Nor should the new screening rules be seen as being alternative to existing competition law. Instead merger analyses will remain neutral as to origin, while the screening regime will cover a deliberately broad set of criteria in order to “allow a full assessment of the full effects” of a foreign takeover.
Ultimately, the point to take away from the breakfast briefing was that markets require regulation, and that the overarching objective of the regulation is to be for the benefit of consumers. Citing the example of the recent investigation into a proposed Dow-Dupont merger (in which the two parties proposed cutting their R&D activities into pesticides) Ms. Vestager was clear that the actions here – requiring the research institutes of the two parties to be spun off as a separate entity before merger approval – was to the benefit of consumers across the single market, preserving, as it did, innovation in a key sector. Despite challenges thrown up by the modern economy – such as applying traditional tax rules to place of profit of digital enterprises – the principle remains; regulation and competition law should aim to ensure a level playing field, and a tax bill should not serve as a proxy measure of how well connected one is with national regulators. Reflecting that, as a politician, she had come to learn that “…passing regulation is hard, but implementing it is ten times harder”, the Commissioner finished her address by calling for greater co-operation from the OECD and other international bodies, envisaging that competition policy and regulation could go forward hand-in-hand – reminding the meeting that where change is needed, “the Commission has the muscle to do it.”