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Silicon Valley's worst nightmare? Vestager is back as EC competition chief and more powerful than ever

Margrethe Vestager
Margrethe Vestager has been reappointed as competition commissioner, with additional responsibilities

For Silicon Valley, it may be the nightmare scenario.

Just as the world's biggest technology companies had been expecting her to sail off into the sunset, their arch foe Margrethe Vestager is back - this time more powerful than ever.

The European Union's uncompromising Danish competition commissioner, who was once accused of "hating the US" by Donald Trump and who has levied a string of huge fines on Google and Apple and launched a string of other competition probes against the industry, had been due to end her five year term this year. 

Instead, new European Commission president Ursula von der Leyen confirmed Vestager, 51, would keep the competition brief and handed her fresh powers as vice-president of digital - responsible for protecting the interests of Europe's technology industry.

The appointment, which will unite European policy and enforcement responsibilities for the first time, was a Brussels crowd-pleaser described by one analyst as "Vestager on steroids".

But what will her return mean for the tech industry? And how is she likely to wield her new powers?

In a nutshell, the reappointment hands Vestager five more years to continue holding technology companies to account and see through the appeals in her key court cases, some of which could kick off before the end of the year. 

There were audible gasps in press room when she was announced. Vestager had originally been considered a candidate for von der Leyen's top job and few had expected the decision to keep her on.

"Happy for and humbled for the task ahead, looking forward to work with new and well-known colleagues," Vestager said on Twitter. 

When asked whether Vestager's re-appointment could annoy the US president, who has referred to her as "your tax lady", von der Leyen was succinct: "The only aspect that matters in assigning portfolios is quality and excellence. Margrethe Vestager has done an outstanding job."

A string of other candidates had been touted for the competition job--  among them former Italian prime minister, Paolo Gentiloni, and former French defence minister Sylvie Goulard. Whoever was appointed would have "big shoes to fill", one legal expert said yesterday. Who better that Vestager herself to fill them?

She has reasons to be cheerful. Alongside fellow European Commission presidential candidate Frans Timmermans, who was assigned the environmental brief, Vestager's meaty consolation prize for losing the presidency seemed more like a promotion, demonstrating how important technology has become in the Commission's future strategy.

So what will Vestager do next?

Described as an "effective communicator", Vestager has successfully built her profile within the ranks of the Commission as well as the international stage.

In her first five years in charge of the competition brief, Vestager dealt stinging blows to big tech. Apple was told to hand back £11.42bn in back-taxes after being granted “illegal benefits” by Ireland. Amazon was ordered to pay €250m in back-taxes to LuxembourgFacebook was fined £96.5m for misleading regulators over the deal to take over messaging service WhatsApp and chipmaker Qualcomm was fined £875m for paying Apple to not use competitors’ technology in smartphones.

The largest fine she handed was to Google in 2017, a record £2.1  billion – which the firm is 
appealing against – for giving its own comparison shopping service an illegal advantage in search results. She also threatened to break up the search giant in an exclusive interview with the Telegraph last year. 

Vestager has used the tactic of leveraging state aid law as an instrument to drive forward her agenda. She will now start getting the judgments to see if she was right, says James Aitken, a partner at magic circle law firm Freshfields Bruckhaus Deringer, setting the tone for what cases she could bring next.

"That was one of the key themes of the Vestager mandate. Whether that continues to be the same, that’s going to be affected by a large deal by court judgments," he said. "The judgments are awaited and it’s not clear the Commission will definitely win."

If she can, the Dane will continue the policy that has come out of Brussels in the last few years. 

Restarting an ongoing investigation into Amazon’s use of merchant data, investigating Google over claims that it unfairly favors its tool for searching job listings, and arguing the Apple tax case appeal, which is reaching the European Court of Justice next week, are likely to be the top items on her to-do list this year. 

"There are a lot of fields where Europe is lagging behind, but in competition it has a lot of competence and power and she has been able to use it quite actively,” says Johan Bjerkem of the European Policy Centre think-tank.

“She will probably be working a lot and probably even more than before."

But Vestager is likely to face Google and Amazon at the negotiating table as well as the courtroom, as she has been tasked with boosting Europe’s digital capabilities to help companies compete against their counterparts in the US. This, experts claim, will involve completely upending the policies surrounding data collection in Europe without disrupting the GDPR, which will be a “massive challenge”.

Why technology giants should be worried

Vestager has led the charge that has made things rather uncomfortable for Big Tech policy executives both in Europe and their home market. The US authorities have clearly taken inspiration from Vestagers’ bold approach, and have most recently launched a concerted, state-level legal challenge against Google and Facebook over competition issues. The US Department of Justice has opened separate competition investigations into Google, Amazon and Facebook. 

The European Commission's focus on digital giants is set to sharpen further under Vestager’s second term, predicts Alexi Dimitriou, a lawyer at Ashurst. “With her remit also expanding to coordinating wider digital policies, digital business should expect regulatory intensity to continue."

Technology giants have no cause to be more concerned than they already should be, but there is no doubt that they will face pressure to adapt to the standards expected in the European market.

Vestager will wear two different hats in this new role, but she is unlikely to bow down to pressure she may get from elsewhere and will listen to voices from France and Germany who have said they want to be more active on the international scene and compete against the US and China. One of the loudest is among her biggest cheerleaders, French president Emanuel Macron, who campaigned for her after she joined a cohort called the Alliance of Liberals and Democrats ahead of the European elections earlier this year.

Camino Mortera-Martinez, senior research fellow at the Centre for European Reform, says the decision to couple competition law and digital issues for the first time is important. 

"Digital stands for everything, from security, to jobs, to the economy and civil rights," she explains. "By tying it to competition law, which has been used as a geopolitical tool, you risk alienating the partners that you need to work closely together with you.”

Mortera-Martinez argues that tech giants are unlikely to warm to the woman who hands them multi-million euro fines and then asks them to line up to invest in European tech. 

"She is a policewoman who is going up to the Googles and Amazons  for abusing their positions and the next day sit down with them and ask for cooperation on the code of conduct and GDPR."

The criticism leveled at the last commission was going too far “by the book”, instead of thinking about the more long-term consequences that harsh competition penalties might have. Vestager will have to adopt a hard-line, yet pragmatic, approach if she is to succeed at both roles.