Margrethe Vestager was in a familiar place last week — at the center of global attention. But even as she levied record-breaking fines for illegal collusion on Europe’s largest truck manufacturers, it was clear that not all is well with the antitrust commissioner from Denmark.
The blockbuster cases that have turned her into a public figure, the subject of glowing profiles in international media, are stalled or headed toward a quiet resolution. Inquiries against Google, Apple and Gazprom that promised to close with a bang, now seem at risk of going out with a whimper.
Her supporters are concerned. Those who turned to her for answers to their problems are dismayed. And not even last week’s high-profile crackdown could ease the impression that the one commissioner who everybody believed would able to break through the bureaucracy is sinking into the Brussels quicksand.
Officials working for Vestager say the pressure to meet deadlines is intense. One team, tasked with investigating Google, toiled day and night in mid-April to finalize antitrust charges over the dominance of the company’s Android operating system.
When, in 2015, a group of officials updated Vestager on an investigation that had gone on for years, her response was withering. “Close it,” she shot back.
“The Google case is, to my eyes, the case for this Commission,” said Ramon Tremosa, a Catalan MEP. Together with investigations into unfair tax practices, its outcome will determine “the legacy of Commissioner Vestager.”
Vestager is reaching a point in her tenure when she has to make a difficult decision, said Fredrik Erixon, director of the European Centre for International Political Economy. “She can either test the limits of competition law … and fight these cases till the end of her tenure,” he said. “Or she has to exit in a graceful way, without going for the hard decisions.”
A powerful portfolio
As Europe’s top antitrust enforcer, Vestager has the most powerful portfolio in Brussels. Her peers are forced to watch while their proposals are rewritten by legislators in the European Parliament and Council, but Vestager has true executive powers. National governments have no official say in her decisions, and, unlike her counterparts in the United States, she does not need to convince a court in order to intervene. “This creates a very mighty and powerful dynamic,” said Nicolas Petit, professor of law at the University of Liège.
When companies don’t play fair, Vestager can slap them with eye-watering fines (ask the truckmakers). If she decides a deal worth billions of euros will harm consumers, she can block it. That’s what she did in May, when she harpooned the hopes of Li Ka-shing, Hong Kong’s richest man, to bulk up his mobile business in the United Kingdom by merging it with rival O2.
And she can make governments withdraw support from coddled companies or struggling, strategic industries — as French Economy Minister Emmanuel Macron learned when she forced him to recover €1.37 billion, she said Paris had illegally given to Electricité de France, the state-owned electricity provider.
Google’s stand at the IF! Italians Festival in Milan | Pier Marco Tacca/Getty
Competition commissioners always inspire fear in boardrooms and beyond. When Vestager took office, it was clear that she would be more fearsome than most. She arrived from Copenhagen with a reputation as a ruthlessly ambitious politician, one who had led her small liberal party into a coalition government, maneuvering herself into the most powerful offices in Denmark.
As deputy prime minister, as well as minster of the economy and interior, she rivaled then Prime Minister Helle Thorning-Schmidt as the most powerful person in the country, never blinking as she drove tough economic reforms through parliament. It was her career, more than Thorning-Schmidt’s, that served as the inspiration for the Danish political television series Borgen, which became an international hit.
Joaquín Almunia, her predecessor as commissioner, was a retiring grandee from Spain’s Socialist party, given to grandstanding and high-handedness, but disposed toward compromise, preferring a quick settlement over a drawn-out battle. Vestager, by contrast, was direct, poised, and pithy. Executives saw her as a politician in need of a legacy, and that made them worry.
Vestager wasted no time confirming their worst fears. Bright, powerful, fashionable, happy to talk to the press, her star quickly shined brighter than any of her Commission colleagues — and arguably brighter than any commissioner before her. Newspaper profiles showed her to be steely, yes, but also a bit kooky, a mother of three who liked to knit elephants during meetings in the office. When it came to her mandate, however, she was firm. She would go by the book and bend for nobody — a mantra that was quickly interpreted by many in Brussels as a subtle, but devastating critique of her predecessor’s approach.
And indeed, where Almunia might have avoided confrontation, Vestager was ready to escalate. In her first few months in office, she set the pattern that has defined her tenure thus far, doubling down on controversial probes against Google and the Russian gas giant Gazprom. Other offensives quickly followed, against high-profile targets like Qualcomm, MasterCard, Amazon, and six top Hollywood studios. When in 2015 Vestager announced she intended to bring a controversial probe into Apple’s tax payments in Ireland to a swift conclusion, the company warned it could be on the hook for billions.
Her aggressive stance has won her plaudits both inside and outside the Commission — and brought a stream of powerful petitioners to her office: Apple’s CEO Tim Cook, Alphabet’s Executive Chairman Eric Schmidt, Google’s CEO Sundar Pichai, Gazprom’s Deputy Chairman Alexander Medvedev, France’s economy minister Macron and U.S. Treasury Secretary Jack Lew.
Cases against Vestager
Her successes have been notable. The €2.9 billion fine she meted out to the world’s largest truck manufacturers doubled what had been until then the highest sanction against a cartel in European history. Her tough stance toward telecom mergers was applauded by national regulators and consumer bodies — if not by shareholders. And she extracted painful concessions from beermakers AB-InBev and SABMiller, in exchange for green-lighting their $100 billion merger.
Vestager has defied national capitals with an unflinching stance on subsidies to Europe’s steel and banking sectors and sweetheart tax deals for multinationals. She has also earned plaudits by closing down rudderless probes into the cement industry, investment banks and energy majors. When, in 2015, a group of officials updated Vestager on an investigation that had gone on for years, her response was withering. “Close it,” she shot back.
But when it comes to her most important cases, her wheels seem to be slipping. Take the antitrust fight with Google: During her confirmation hearing in 2014, she told the European Parliament, “I do hope we would not have to prolong this investigation with another investigation and another investigation.”
And yet, in July, 20 months after she took office — and nearly six years after the Commission first opened proceedings against the Silicon Valley tech giant — Vestager filed new charges against Google, this time targeting its advertising business. It’s the third charge sheet she has sent Google in 15 months.
That same day, she amended her case against the company’s search engine. Formally, the maneuver bolsters the case against the U.S. internet juggernaut. In reality, it’s an admission that the previous charges may not have been as strong as Vestager had hoped — and that the case may drag on even longer.
On the day of the decision, Shivaun Raff, CEO of Foundem, a price comparison website that filed an antitrust complaint against Google in 2009, lamented, “We are concerned that if [the Commission] does not act conclusively in the near future there may be little competition left to protect.” A vocal critic of Almunia’s attempts to settle with Google, Raff was until recently an enthusiastic supporter of Vestager’s approach.
Vestager seems to have underestimated how mired in bureaucracy, controversy, and political considerations a probe can become.
The case against Apple has proved similarly slippery. At the beginning of her tenure, Vestager said she hoped to finalize the case by June 2015. More than a year later, nothing has happened. Observers of the Commission point to political considerations; a desire to avoid making a controversial announcement during the painful coalition negotiations that followed inconclusive elections in Ireland earlier this year. (Apple’s European headquarters is in Ireland.) Vestager may also be waiting to see how appeals play out in two similar cases — especially given the U.S. unabashedly lobbying for Apple.
On a visit to Brussels in January, Robert Stack, the U.S. Treasury’s deputy assistant secretary for international tax affairs, accused Vestager of unfairly targeting American companies and called into question “the basic fairness of these proceedings.”
Advisers involved in the tax cases struggle to make sense of the Commission’s irregular and sometimes circular requests for more information, saying a decision could have come months back. Michael Noonan, Ireland’s finance minister, has said he expects a decision on whether Brussels will move against Apple by November. But others expect that sensitivities over the looming U.S. elections could further delay it. “It is a difficult time for competition enforcers in Europe,” observed one former European commissioner.
If there was one antitrust case that seemed suited to Vestager’s Manichean worldview, it’s the one against Gazprom. The complaint against the Kremlin-controlled monopoly accuses it of using gas prices as political leverage against dependent Central and East European countries. And yet, rather than bringing the hammer down, Vestager has been slowly moving toward a no-guilt settlement.
Russia’s gas giant Gazprom | Vasily Mamimov/AFP via Getty Images
Given that oil and gas prices have plummeted since the case began, hers is a pragmatic approach. But any deal would hand Moscow a victory at the expense of the bruised former members of the Soviet bloc that hoped Brussels would extract its pound of flesh. “Vestager is selectively tough,” says Jacek Saryusz-Wolski, a Polish MEP, who accuses her of taking hard stands against companies in Western Europe, while being “weak” when tackling Gazprom’s “gangster conduct.”
“She is really not in a hurry, when she should be,” he said.
Quagmires
Vestager seems to have underestimated how mired in bureaucracy, controversy, and political considerations a probe can become. As Almunia’s staff predicted when she took office, she is struggling to impose herself on the competing complexities of her brief. She started her tenure with a reputation for being “a steely competition commissioner prepared to fight against big companies or against governments,” said Erixon, the think tank director. “What is beginning to emerge is a different profile. Not steely, but of someone who is occupied with the consequences of the decisions they take.”
The Commission’s investigators may be free of outside interference, but internally they have to negotiate with teams of competition economists and lawyers, who wield virtual vetoes over any decision. An antitrust probe into industrial conglomerates Honeywell and DuPont was paused for more than a year as officials struggled to provide the accused access to the evidence levied against them. The Commission’s longest-running investigation into Google has been delayed by internal divisions, and its economists are said to have queried allegations that Gazprom overcharged its customers.
A recent data-dump by Google’s lawyers crashed the Commission’s systems, sending officials scrambling to rent a super computer powerful enough to handle the inflow. In the same probe, Google told Vestager’s office that it had hired dozens of temporary lawyers to scan the evidence filed against it — and still needed additional time. “She inherited some very complex cases,” said Petit, the law professor. “The Gazprom and Google cases are quagmires. Maybe the expectations were too high.”
Nor can Vestager truly ignore what’s going on in the rest of Europe. Events like the refugee crisis, Russia’s intervention in Ukraine, and the Brexit referendum have forced Brussels’ usual policy work to the sidelines. The conclusion of a high-profile and politically toxic probe into Real Madrid, Barcelona and other Spanish football clubs was issued with little fanfare in order to avoid disrupting the coalition talks that followed a second Spanish election this year. “Even if she is allegedly independent, she is still very much influenced by the wider EU agenda,” said one former official.
Vestager is aware of the criticism. “We need to start closing cases against Google, not just opening them,” she told CNBC last week.
And yet, despite the inevitable sense of urgency, officials close to Vestager depict her as sanguine about the pace of her progress. She is focused, they say, on ensuring that all parties are given a fair hearing and on ensuring that her decisions can withstand appeals before EU courts. As she frequently puts it, “It is better to be fast than slow, but it’s even better to be just.”