Guest Blog: Ronan Dunne, Philip Lee

28 Dec 2017 | 02.49 pm

Guest Blog: Ronan Dunne, Philip Lee

Margrethe Vestager’s competition agenda in 2018

28 Dec 2017 | 02.49 pm

Dubbed by some as the most powerful woman in Brussels, Margrethe Vestager has made her mark as the EU’s Competition Commissioner. A multi-billion euro fine on Google for abuse of dominance in summer 2017 has cemented her position, in addition to findings of illegal state aid to behemoths like Apple, Amazon, Fiat and Starbucks. This has helped turn this former Danish deputy prime minister into Emmanuel Macron’s favourite to succeed Jean-Claude Juncker when he steps down as Commission President in 2019.

Here are five competition issues that Commissioner Vestager will promote in 2018 and which Irish businesses and multi-nationals need to be aware of:

Digital Businesses will start paying more tax

Vestager has said that the EU will develop new tax rules to govern the digital economy “if there’s no international answer to this issue” by spring 2018. Given the current lack of international consensus on this issue it looks a racing certainty that it will fall to the EU to take the lead.

Vestager believes European tax systems are too focussed on a company’s physical assets, and are now playing catch-up with the digital economy. Her proposal for new EU rules will be designed to ensure digital companies are “taxed fairly”.

In a speech in Paris in November she said that “domestic digital businesses pay less than half the effective tax rate of their offline equivalents.” So this will not just be a case of targeting the giants like Amazon, but rather all online retailers – big and small – will be affected by new tax rules.

Data and privacy will take centre stage

Following on the digital theme, Vestager has also said that next year will see an emphasis placed on how businesses use our data. She wants this to be done “responsibly… so we can be sure that they’ll respect our basic right to privacy.”

Vestager acknowledges that new ways of collecting and working with data have huge potential to improve our lives. But she believes this will only happen if people have confidence that their data will be safe. With the roll out of the General Data Protection Regulation (or GDPR) in May 2018, Vestager sees this as the right moment to push forward more competition enforcement in the digital economy to ensure we have diverse online markets in Europe, “where companies compete not just to cut prices, but to protect our privacy better.”

Vestager says this will extend to ensuring that compliance with competition rules is built into digital businesses’ algorithms by design.

Cartelists will be fined greater amounts than ever before

If you’re involved in a cartel of any kind, expect to pay more fines under Commissioner Vestager! That’s the finding of analysis conducted comparing the first three years of Vestager’s reign with that of her predecessor, Joaquin Almunia. Vestager’s fines per company were on average twice as high as those of her predecessor.

There are some factors to explain the increase, like the multi-billion euro fines levied on participants in the trucks cartel. But it’s also clear that Vestager is not afraid to hit companies where it hurts in their pockets. That’s the signal she’s sent out since taking up her role in November 2014, and with two years of her current term to run, expect to see that trend continue in 2018.

It’s not just American businesses that are in the Commission’s line of fire

Given the findings against Google, Facebook, Apple and Starbucks during her tenure, Commissioner Vestager has been (unsurprisingly) accused of disproportionately targeting US businesses for antitrust scrutiny. Indeed, Apple’s CEO Tim Cook called the state aid finding against his business as “total political crap”.

But Vestager has always made it clear that she will go where her competition law mandate pushes her to investigate. So we’ve seen action taken against the likes of Fiat, and now the Commission has opened an investigation into the tax affairs of one of Europe’s, if not the world’s, largest retailers in Ikea. Founded in Sweden but now with its headquarters in the Netherlands, Ikea would be a very prominent European scalp for Vestager. Expect that trend to continue in 2018 as the scores are evened up.

The Commission will defer to national authorities for ‘local’ matters

One of the European Commission’s work priorities for 2018 is the reduction of its workload through the modernisation of domestic enforcement agencies across Europe. The Commission is introducing a series of initiatives to help give teeth to local regulators.

In Ireland, this could potentially result in agencies like the Competition and Consumer Protection Commission (CCPC) being given the power to levy civil fines (a move thus far resisted on the basis of Irish constitutional law arguments relating to the administration of justice in the state being the responsibility of courts presided over by judges).

Vestager recently stated that the CCPC – as our national competition agency – is best placed to deal with the tracker mortgage scandal, including the competition complaint referred by Brian Hayes MEP to the European Commission. We’re likely to see more deference shown to national regulators in 2018 and beyond, as the Commission looks to solely focus on pan-European matters.

2018 is likely to be a busy year for Commissioner Vestager, particularly if she has her eyes on the bigger prize of the European Commission Presidency in 2019. Expect to see lots of competition law enforcement, high fines and plenty of press coverage throughout the year.

Ronan Dunne is Partner and Head of Competition, Regulated Markets & EU Law at law firm Philip Lee

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