"I'm not an enemy of tech companies, I'm an enemy of bad behavior"
Margrethe Vestager, the European Commissioner for Competition, is the only regulator in the world to curb the aggressive appetite of tech giants. Now, with a second term and an expanded role as regulator of the EU's digital economy, she is free to craft the rules that would limit Facebook's AI and virtual currency, and is unmoved by Trump's attacks on her
The interview was orignally published on October 24, 2019
September 10th was a rough day in Silicon Valley. "Margrethe Vestager, the EU Commissioner for Competition, who is shaking up the tech giants, will win a second term" the headlines of the economic newspapers chanted. Presumably Tim Cook, Eric Schmidt and Mark Zuckerberg were not as thrilled as the press. During her first term, the "Iron Lady" from Brussels imposed unprecedented fines on the corporations under her leadership: Apple was fined 13 billion euros; Google was fined 8.25 billion euros in three separate cases; And Facebook was fined 110 million euros. And that's only a partial list.
It is not only that the Danish politician, whom The New York Times has dubbed "the most powerful regulator of big tech on the planet," was unusually elected to a second term: she was also promoted, and was recently appointed Executive Vice-President for a Europe fit for the Digital Age. The army of regulators she heads already has 900 employees and now, as its role expands, that number is expected to grow even more. Two days after announcing her promotion, she shared a tweet explaining, once and for all, how to pronounce her name: Ves-ta-yer, with a silent g. To the onlooker, it seemed as a tease, guaranteeing she has no intention of disappearing. Quite the contrary: she's about to up her act.
When I meet Vestager (51) in her office at the EU headquarters in Brussels, along with three other European journalists, it immediately becomes clear that she is not the pleasing type. If she doesn't appreciate the question she's being asked, she replies with a mix of contempt and boredom that miraculously passes politely. When asked if she had noticed similarities between her and the President of the European Commission, German Ursula von der Leyen, which stemmed from being both women who were required to shatter the glass ceiling, she replies laconically, "No. We talk about work." When a Portuguese journalist asks what she thinks of Donald Trump's statement that Vestager is the greatest hater of the United States he has ever met, she stares at her half-freezing and half-amused, and answers with the question: "Well, how can you even respond to something like this?".
Her reputation as "the European who ruins corporate America's party" is one that Vestager has rightfully earned. The opening salvo was fired in October 2015, almost a year after she took office as Commissioner for Competition, when she announced that the tax benefits given to Starbucks in the Netherlands and Ford in Luxembourg (20-30 million euros for each of the companies) were illegal. In August 2016, Apple was forced to pay the highest tax fine in history, 13 billion euros, after an investigation revealed that the Irish government had given the company illegal tax benefits; Apple and Ireland, by the way, are appealing the decision.
But nothing prepared her for spring of 2017, when she became one of the most sought-after regulators in the world overnight. In May, Facebook was fined 110 million euros by her, for lying to the EU about buying WhatsApp and declaring it could not cross-reference user data on both platforms. A month later, she fined Alphabet, Google's parent company, 2.42 billion euros, after it emerged that the search monopoly had used its power to curb competition when it slammed the search results of its own price comparison services. Another month later, she determined that the Luxembourg government had illegally reduced the tax rate of Amazon from 2006 to 2014, and ordered it to charge the company 250 million euros. In January 2018, she fined Qualcomm 1 billion euros for paying Apple billions of dollars to not buy chips from its competitors; In July, Qualcomm was imposed yet another fine, this time 242 million euros, for abusing its dominance in the cellular market. On the very same day it yet again fined Google, this time with 4.34 billion euros, for using illegal practices with Android device manufacturers to strengthen the dominance of its search engine; In March 2019, it again fined Google 1.5 billion euros for abusing its power in the field of online advertising.
In between, She fined MasterCard with 570 million euros for restricting the possibility of traders enjoying good conditions offered by banks in other countries, in violation of EU antitrust rules. Along the way, Vestager also widened and diversified her portfolio and fined ASOS, Philips, Pioneer, Danone and Marantz a total of 111 million euros, due to price coordination; More recently, she also imposed a fine of 32 million euros on two canned food companies in the Netherlands and France, again for price coordination and cartel-like behaviour.
Unsurprisingly, these actions have gained Vestager many "haters", especially in the United States. And while Americans don't hesitate to speak out against her bluntly — Tim Cook, for example, has called Apple fines 'total political bullshit' - Vestager insists on not making it personal. "I'm not an enemy of Google or Facebook specifically, but of bad behavior", she clarifies. "Most of these companies are quite amazing. Sometimes, when I look at cases that we manage and end in a fine, I really wonder 'why did you do this?'. Competition is what keeps you on your toes. It makes some of the biggest companies on our planet make choices that lead them into illegal behavior. Yes, competition is that strong. That's why it's so important to have it".
Are Tech executives reaching out to you personally to remove investigations against their companies? Are they pressuring the European Parliament?
"Well, you know, sometimes it reaches me through the grapevine that they’re not too happy with the European approach", she laughs. "But it doesn't come directly to me, and they still seem very happy to do business in Europe".
The efficiency of fines
"It's just one element"
Coming from a Middle Eastern country where competitiveness is almost a dirty word, it's hard not to be impressed with Vestager. "My goal in imposing the fines was very simple: to serve European citizens in the best way," she clarifies. "I said earlier in my term that if there are Europeans who feel they had a better chance of making it after these five years, it would make me very happy. It's hard to assess at the moment if this happened, but at least from some of the feedback I get, there seem to be quite a few people who are satisfied with the work done and the tax cases, because it's only fair that every company makes its relative contribution. The big companies are welcome to be big, but they have to pay according to the rule book. This is also important for smaller companies and the customers they serve, who feel that it is real and that the law is enforced".
On the other hand, there are claims that the fines are too small to bother the big tech companies, and that they are imposed only after the damage to competition has already occurred – and even so they are not the ending point but only the beginning of legal battles.
"It's too early to judge whether the fines are effective or not, but you have to understand that the fine is just one element. The other two elements are that the behavior of those who are punished will stop, and that the fair competition will return to its origin. The last element is the most complex: take, for example, the Google shopping case, which we still monitor. We are seeing more competitors in the search engine and more clicks on products sold by competitors (according to EU data, the click rates on competitors' products increased from 6% in June 2018 to 40% in March 2019, RB), but very little traffic goes to those competitors. So, I say, 'Two out of three is not bad, but three out of three is better.' So of course, we keep looking for solutions, and learning, because bringing fair competition back to digital markets is another thing than other markets. So yes, absolutely, we are trying to think about what medicine will be needed in the future in order to enable a truly open market".
Some of these medications were unveiled on October 16, two days before our meeting, when Vestager ordered chipmaker Broadcom to immediately cancel exclusivity clauses in which it charged six of its customers, modem manufacturers and tv converts — even before a decision was made in its investigation against the company. Such an interim decision is an unusual step that has not been used in the EU in nearly two decades, since a high legal threshold was set to use it.
"This tool has always existed in our toolbox," says Vestager. "Since the pace in these markets is fast, I asked my teams to pull it out. I don't know what your toolbox looks like, but my bottom drawer has tools I don't think about every day. Most of us use a hammer and a screwdriver, and that's it, but at the bottom there are fascinating tools. If I find interest in them, maybe my hand work would be prettier," she laughs.
"We started by dragging this tool on the desktop and internalizing that when it's the right time, we can use it," her amused tone becomes severe. "In Broadcom's case, we have good reason to do so: we can already show that its contracts are causing irreparable harm. Of course, the investigation is ongoing, but this tool will allow us to make sure that the market is not lost, because these chips have little validity, and if we wait a few life cycles without an incentive for innovation, then other competitors — not only in this market but in other markets — will suffer a death blow. That's why, especially now, this tool is becoming important."
Criticism of Americans
"I don't have time for this"
Part of the inherent tension in Vestager 's role stems from the gap between this European approach and its American counterpart. When asked where she draws a line between protecting competition and market intervention, she replies, "It depends on the type of regulation. In Europe, there has always been a willingness to regulate the marketplace. That is why we call our economy a 'social market economy': it deals with issues of the environment, standards in the world of work, etc. Our legislature has determined that within this infrastructure you can compete.
"When the controversial merger between Bayer and Monsanto took place, for example, people said we should take a pro-environmental stance. My position was that a merger shouldn't help the environment, and that the legislature should make sure that environmental laws are maintained before, during and after the merger. Now we're discussing how people whose work relies on a platform (gig economy, RD) can unionize. Of course, there are those who think that unions are hurting competition, and they can really hurt it, but as a society, we don't want people to be denied the right to unionize."
The United States, the country of origin of most of its "targets", until recently, took the opposite approach to that of Vestager — the Chicago School, an influx of neoclassical economies that believes companies that merge is effective, and that every product, even a monopoly, does not break the law provided that it is high-quality and free to the consumer. In these circumstances, the tech giants have grown undisturbed and gained enormous power that competes with the power of countries.
But lately, the unified front taken by the American government against the tech giants has been starting to crack. In July, a congressional hearing was held for Apple, Facebook, Google and Amazon on abusing their power to curb competition and innovation. Lawmakers from the antitrust subcommittee sent companies a demand for additional internal documents. More and more politicians, including prominent Democratic nominee Elizabeth Warrenare, are voicing their stand against centralization and in favor of dismantling monopolies — a solution that Vestager, by the way, disapproves of, but as a last resort.
When I ask what she thinks about her standing alone in the fight against the tech giants, she sighs. "Well, obviously my colleagues overseas have their reasons for acting the way they do," she says, "and having been quite busy, I don't find that I should use my time to question what they're doing or not.
"That being said, I find it is very intriguing that the Federal Trade Department and the U.S. Department of Justice have reached an agreement on the division of powers between them, and have begun to ask questions differently from how they were asked five years ago. This is important, and says we have changed the approach: we need technology, but as a society we must be able to control its down sides. I hope our cases have helped raise awareness — because when people see that we're asking questions, then maybe there really is something to look at."
And no, once and for all, she doesn't hate the United States. "In Denmark, people love the United States, and feel a very close connection to Americans", she says. "Personally, my partner has close family in the United States, and we've traveled there quite a lot before".
This month, an announcement of the opening of an investigation into the Hungarian government's decision to use public funds to support Samsung's battery manufacturing facility. Is that a signal to Asian markets?
"No", she replies impatiently, "I don't have specific targets in my sights, other than to make sure the competition isn't compromised. And we don't do it by signaling, but we just say explicitly, 'We think things don't go the way they're supposed to', and ask tough questions".
Presidency of the European Commission
"Maybe in five years" time.
She was born 51 years ago in Glostrup, a suburb of Copenhagen, as the eldest daughter of a couple of Lutheran priests. In an interview with The Economist two years ago, she said that the openness that characterized her childhood, as someone who grew up in a rural area and in a house whose door was always open, accompanies her throughout her career. Adhesion to religion is a little less — "If I had a motto, it would be 'believe in God, fear the church'", she said in past interviews. Her political affiliation was inherited from her grandfather, one of the founders of the Social Liberal Party, and her father Hans, also a politician from left-wing circles who temporarily served in the Danish parliament in 2012, while his daughter was already deputy Prime Minister Helle Thorning-Schmidt.
Vestager, a staggering 5'10", is married to Thomas Jensen, a high school math and philosophy teacher in Copenhagen, and a mother of three daughters (23, 20, 16). It has previously been reported that the two eldest have already left home while the youngest lives with her father in Copenhagen, and that Vestager, who works in Brussels, makes sure she visits them at least two or three times a month. "I've often been asked if I'm a bad mother to my daughters, and I always say the same thing: 'They don't know anything else, it's the only mother they have'", she told The New York Times last year.
She embarked on her political journey at the age of 21, after completing a bachelor's degree in economics from the University of Copenhagen. Less than a decade later, in 1998, she was appointed Minister of Education of Denmark. In 2007, she was elected head of the Social Liberal Party and in 2011 she was appointed Minister of The Interior and Economy and Deputy Prime Minister. During her tenure, she had to deal with heavy cuts to Denmark's welfare budget, which narrowly escaped the global recession. The spotlight on her made her Denmark's most prominent politician, and an inspiration for the main character in the drama series "Borgen" — the fictional Prime Minister of Denmark, Brigitte Nyborg, who struggles to balance personal life with career.
Perhaps that is why in August 2014, Thorning-Schmidt announced Vestager's candidacy for Denmark's representative to the European Union. Today, by the way, Vestager is in a similar situation: last May, she announced her candidacy for president of the Commission, but will eventually settle for deputy to Von der Leyen, who made history as the first female president. When I ask about the last missing step in the old wooden ladder in her office ("If a woman aspires to climb high, she has to bring her own ladder", she says), she laughs nervously and says: "It's still far from me. We can talk again in four or five years".
Feminism and gender equality are issues close to Vestager’s heart. During the union presidential campaign, she declared that she didn't care who was elected as long as she was a woman. She also speaks proudly of the importance that for the first time in the commission's history there is a gender balance in the senior staff — 13 women and 14 men. "We are working very hard to make sure that balance is maintained", she says. "Our group image will look different, which is a wonderful thing, because once you break the uniformity of how you look, the uniformity of how you think is broken", she said.
She also expresses her feminism in her own unique way: she knits during meetings, especially elephants (she gave her successor in the Danish government a knitted elephant as a gift, accompanied by a letter: "I knitted a friend for you. It’s an elephant. Elephants are social, insightful animals. They live in communities - and I have to say it - they live in matriarchal societies. They bear no grudge, but they remember well"). Her fashion style — probably the only politician in the world who successfully combines colorful silk dresses with sneakers — is seen as defiant of the suits of the pants typical of the top politicians, who emanate them with a masculine look.
Her Brussels office is filled with art and design items, including modernist paintings, colorful classic chairs by Danish architect Arne Jacobson and a hand-fingered sculpture, which she received as a gift from Danish unemployed people after cutting their allowance. 'For me it's a reminder that not everyone sees things the way you do, and not everyone will agree with you. Sometimes it also helps to understand yourself", she said previously.
"I have clones here and there"
Vestager, as mentioned above, will play a dual role in the coming term — on the one hand, will continue to serve as a regulator that restrains the tech giants, and on the other hand, will be charged with regulating the digital economy. In this framework, she will closely monitor transactions involving big data trade, and deal with privacy and information security issues. She would also have limited legislative powers.
What are the targets in her sights for next term? Already in the first 100 days of the mandate, she plans to introduce regulation to the artificial intelligence world — which is currently being put together by a body of 52 experts from across the industry spectrum. "The only good thing that comes out of the delay at the start of the term is that I have more time to work on it", she smiles. "It is very challenging to create an infrastructure for artificial intelligence, because it is a field that is very loosely defined on the one hand, and varies from sector to sector on the other. Artificial intelligence on public transport is not the same as artificial intelligence in medicine. The goal is to make sure that AI serves us users. Trust in technology is decreasing, and we need to try to find the best way to do what we do in a way that builds trust. We also need to do it as quickly as possible, and talk to as many people as possible about public transportation and medicine, because it's impossible to build trust without listening".
Libre, Facebook's new digital currency, will also be occupying her in the near future. "While Libre doesn't exist yet, we're already asking a lot of questions to figure out how it will work", she says. "Quite a few people are working on it, because if you want to invent a new currency, it must be subject to the same regulatory conditions as all other currencies". It is also conducting investigations against Amazon over the use of information, revealing that it has recently "sent questions" on various issues to Apple and Facebook, but "these are very early stages".
Vestager's statement that there are "quite a few people working on it" is an understatement. Already, her staff has 900 employees, and now, she said, that number is only going to grow in a way that reflects the increase in her role.
The change in her role will also increase the number of teams she manages. "At the beginning of my first term here I read a minute of a meeting transcript, and suddenly I saw my name in there next to one of the quotes", she says with a smile. "I thought to myself, 'That's a smart statement, I could have said it, but I didn't attend that meeting'. Before, I didn't realize that everyone who worked for me spoke for me. So basically, I have clones here and there, and now I'm going to have a few more. I suggested it at home recently, too, and somehow it sparked fear", she laughs. "In some roles we will definitely double the staff to cope with the load. We're going to have to do everything more efficiently, so we have time to go home, cook something and watch something that's a complete waste of time".
And what do you do when you finish a day's work?
"Actually, it's embarrassing, but I just finished a season of RuPaul's Drag Race (American Drag Queens Reality, RD). It was a new experience! And I also like everything similar to Bake Off, Carpentry, Architecture, every field. I love this concept, because people learn, develop, interact, and change, and you as a viewer can witness that change."