The European Commission faces a tough challenge when considering its policies regarding competition in the market: It is a fine line between protecting domestic companies that struggle in light of giant companies from abroad and softening antitrust rules that Ms Vestager has to walk as EU competition chief.
The EU competition commission
As the new European Commission was inaugurated, the liberal ALDE (Alliance of Liberal Democrats for Europe) fraction was in two minds about it. On the one side, they did dream of installing the first liberal president of the commission that would also be female, on the other side they realistically looked to stay in the very powerful and relevant post of competition commissioner that they competently lead over the past tenure. In the end, it was a compromise between the two. Margarete Vestager was nominated to be Executive Vice President-Designate of the European Commission and her competition portfolio was extended to include overseeing the EU’s digital policy.
The Danish politician became famous on a global stage when US president Trump called her the “tax lady” in one of his ranting tweets. The origin of this was the announcement of scrutinizing the big tech companies of the US with regards to their economic impact on competition.
Vestager, member of the Danish Social Liberal Party has had a distinguished career as a political leader of her party 2007-2014 and has served as Minister of Economic Affairs and the Interior from 2011 to 2014. In her function as antitrust chief of the Union, she has never failed to emphasise the need for fairness especially to everyday consumers and with her professional manner and unbowed determination has made an impression as a dominant player in the business world. In addition to this, she was the most popular commissioner under Juncker.
Vestager’s biggest projects
One of her department’s most disputed decisions stands for the general issue that the competition commission faces these days. When Siemens and Alstom announced the merger of their rail business units the decisions was welcomed by politicians of the states.
The two companies that produce the TGV and ICE trains proposed the merger to compete against the even bigger CRRC, a Chinese industry giant that is approximately double the size of the two European companies together and has an estimated 30 billion euros revenue.
The big issue is that CRRC is state-backed and that China is keeping close control over foreign investments in its firms and doesn’t open its domestic markets to international competitors. It is for those reasons that the biggest German business lobby BDI has branded China as a systemic rival in a report earlier this year.
Although typically advocated by the French, the Germans and other member states are now warming up to the idea of taking serious industrial policy measures. Peter Altmaier, for instance, economy minister of Germany introduced a “national industrial strategy 2030” earlier this year and also a joint manifesto on industrial policy with counterpart De Maire in which they call for an initiative to adapt the European antitrust laws to be able to compete globally with other players that don’t have to abide by the same rules.
The two countries started to agreements on many other economics issues (the main exception being the reform of the eurozone) in the last few years, so it will have to be seen how much they can achieve in the discord with the Commission.
The suggestion was also taken up by Annegret Kramp-Karrenbauer, leader of the Christian Democrats, who wants to see Europe at the forefront of setting standards through European champions. In an interview for Politico, she demands that EU industrial policy laws are overhauled and big mergers should be made possible. She emphasises that the rules that are shaping tomorrow’s handling of new technologies with a focus on the critical time window on AI regulation and standards as well.
EU on tech giants
However, this would require an extreme balancing act according to former EU competition chief Monti: He has warned that an aggressive France could undermine the commission’s credibility as an instrument in their fights against the big tech companies which is something that France has as a main priority.
On that front, Vestager has made big promises and can point to an outstanding track record that she has in the realm that is now accredited to her in the term ‘digital’. She has taken on Apple (€13 billion payment), Facebook (€110 million euro payment) and Google (€1,4 billion euro payment). And she went so far as to say that the EU has the tool but wouldn’t actively endorse the strategy after being asked about breaking up US tech giants, a strategy that has also been circulated in US antitrust circles.
In the extended range of her portfolio, she sees the biggest challenge in the masses of data that will be collected from citizens’ activities and should be protected.
At her EU commissioner hearing, she pledged to make Europe not like China or the US, but more like itself. And outlined the digital policy as trailblazing a new path in front of the superpowers US and China in critical areas such as AI and competition regulation, advancing Europe’s understanding of itself as the global standard setter.
Major market developments
Geopolitical concerns have ever more increasing importance for governments and their antitrust bodies. National authorities have been blocking foreign investors to take over firms when the acquisition could infringe national security, e.g. in August 2018 when the German government issued its first-ever order not allowing foreign investor Yantai Taihai to acquire a German engineering business or when CFIUS in the US blocked Broadcom’s acquisition of Qualcomm in March 2018.
Additionally, antitrust agencies are increasingly focusing their attention on internal documents of the parties involved in deals. Not only does this include studies, reports and presentations, it can also encompass emails or other messages sent or received by staff. The aim with this strategy is to look behind the intentions of the merging parties and their opinion on the deal as well as their view on the impact on competition in the market. The amount of internal material requested by competition authorities worldwide has rocketed. The European Commission, for instance, reviewed 2.7 million internal documents in its Bayer/Monsanto investigation.
The result of these developments is that “parties to international deals face an increasingly challenging and unpredictable regulatory environment” and that they must “carefully the potential impact of geo-political considerations when setting merger control strategy and allocating execution risk” as law firm Allen Overy outlines in its M&A report.