Competition-related takeaways from Vestager's European Parliament Hearing

By José Rivas, Francine Cunningham

10-2019

Five years after winning the support of the European Parliament to become EU Competition Commissioner in the Juncker Commission, the Danish liberal politician Margrethe Vestager has done it again. MEPs backed her candidacy after a three-and-a-half hour hearing on 8th October during which she fielded questions on her plans to carry out her double role as both the European Commission's Executive Vice-President for a 'Europe fit for the Digital Age' and EU Competition Chief.

Since this is the first time that a Commissioner wears two hats as both a competition law enforcer and lawmaker in a sector of the economy, MEPs were very keen to quiz Vestager on both competition enforcement and digital regulation, on the interaction between the two and, last but not least, on the way she intends to balance the two powers she will hold.

According to Vestager's opening statement in the Hearing, the main principles guiding her work in the next five years can be summed up as:

- applying EU fundamental values to the digital world;
- promoting 'fair' competition; and
- regulating with a purpose.

Her responses during the Hearing also produced some specific competition-related takeaways.

- Role of 'closing aid' in reshaping regions in transition

One of the messages that the incoming competition chief conveyed during the Hearing is that competition policy can be used to serve different purposes. She noted, for example that State aid can play a role in supporting the development of parts in Europe that are in a transition phase, in other words regions that have been based on economic activities that are no longer viable (such as the German coal mining regions). These areas, which are now in economic transition, require new investment to renew their entire economic landscape. In Vestager's view, the primary objective of such investments should be to support people in developing new skills, which will in turn create new businesses, new jobs and new services. The Commissioner-designate acknowledged that Member States, and in particular regional authorities, can sustain this process by delivering what she has referred to as "closing aid". However, Vestager stressed that "closing aid" might not be enough. To avoid the risk of companies relocating their business outside the EU, a subsidy to stay in the region in question and help reshape its economic life, might also be necessary.

- Exemption from State aid approval for regional airports

Among the greatest challenges that the next College of Commissioners will face, climate change can be expected to feature prominently. While the Commission's plan to draw up a "European Green Deal" with the aim of turning Europe into a "climate-neutral continent" have already received a lot of media coverage, its interaction with competition policy tools, and in particular State Aid, had received little attention. Questioned by a Green Party MEP on whether the Commission's new environmental policy would have an impact on the current scope of application of the General Block Exemption Regulation, Vestager said that she did not foresee its review in the short term. To recall, the General Block Exemption Regulation, which was revised in 2017, exempted for the first time State aid to airports (handling up to 3 million passengers per year) from prior Commission approval. Vestager underlined that 'as long as Member States find that it is needed, and it can indeed be needed for connectivity reasons', airports can remain under the scope of this exception.

- Building a competitive-based Industrial Strategy

One of the concepts Vestager used to convince MEPs that she will manage to balance her legislative and enforcement powers was that of a "Competitive-based Industrial Strategy". According to the Commissioner-designate, this strategy should support first and foremost small and medium-sized enterprises (SMEs) which she described as "heart of Europe's economy". Moreover, it should have a cross-sector impact, by enabling different aspects of the value-chain to prosper. In order to reach this goal, Vestager encouraged a wider recourse to so-called "projects of common European interest" (PCIs), such as the project by France, Germany, Italy and the UK to give €1.75 billion in public support to joint research and innovation in micro-electronics, which the Commission approved under EU State aid rules in December 2018. The use of such projects would align with the Commissioner-designate's preference for using (and fully implementing) existing legislation, rather than creating new rules that will require additional time to be adopted.

- Strategic use of Public Procurement instruments

According to Vestager, an additional instrument that can be used to support SMEs, is public procurement, which could also boost EU's position in the global playing field and provide opportunities beyond the Single Market. Indeed, what the incoming Executive Vice-President plans to finally deliver an "International Procurement Instrument" during her next mandate. This instrument was first proposed by the Commission in 2012 and its adoption would help to secure a certain degree of reciprocity with third countries, considered crucial by Vestager. She commented "When we invite people into our market, we should also be invited to theirs."

In addition, Vestager said that a cautious approach should be taken to ensure that foreign companies coming to do business in the EU do not undermine the level playing field in the Single Market, through reliance on public subsidies from their home country.

- Looking for remedies beyond competition tools

Last but not least, Vestager also used the occasion of the Hearing to acknowledge the limits of competition law, especially when it comes to available remedies. Digital markets, in particular, move fast and therefore require rapid action from competition enforcers. That is likely to have been one of the reasons why the Commission decided on 16th October to impose, for the first time in almost two decades, interim measures suspending certain loyalty clauses in chipset distribution contracts pending the outcome of a full EU antitrust inquiry. Vestager has suggested that it is time for enforcers take a different approach. Competition decisions should look at what needs to be changed in the future rather than relying on fines in relation to past behaviours. This might potentially require the consideration of what she called "remedies that are much more far-reaching"'.

- Ongoing concerns about managing a dual role

Margrethe Vestager is undoubtedly the star performer of the outgoing Juncker Commission. Her high profile during her previous mandate as Competition Commissioner can be attributed largely to the tough approach Vestager took in cases involving multinational technology companies. This stance won her notoriety with U.S. President Donald Trump who famously referred to her as Europe's "tax lady" and suggested that she hates the United States.

At EU level, approval of Vestager's candidacy was never in doubt among MEPs who joked about looking forward to 'season 2" − a reference to Vestager's reported role in inspiring the lead character in the Danish drama series "Borgen". However, ongoing concerns have been expressed by some MEPs and other stakeholders regarding how she will balance work in her two main areas of responsibilities. Speaking at a press conference in Brussels on 16th October, Vestager again tried to put to rest concerns by underlining the need for transparency, as well as checks and balances, in the work of the Commission. She also emphasised that the Commission has habitually gained knowledge, for example, from State aid cases or sector inquiries, which had then informed regulation in a way that served consumers. It is clear that technology companies will be among the many industry players and other stakeholders who will closely scrutinise Vestager's every move to see how she will combine her all-powerful dual role as digital czar and competition enforcer. 

A full recorded hearing of Commissioner-designate Margrethe Vestager is available here.