Later this fall something unprecedented will happen at the European Union: Margrethe Vestager will begin a second five-year term as the EU competition commissioner.
Corporate compliance officers and risk managers should brace themselves for what comes along with that: a more emboldened Vestager, trying to develop new approaches to antitrust enforcement and new remedies for companies whose business conduct goes too far.
Earlier this fall, however, Vestager told EU lawmakers that monetary penalties are not "doing the trick" — and in her second term, she’ll also have expanded authority to shape Europe’s digital economic policies.
Vestager’s first term was marked by huge regulatory fines, many of them against large U.S. technology companies. Earlier this fall, however, Vestager told EU lawmakers that monetary penalties are not “doing the trick” — and in her second term, she’ll also have expanded authority to shape Europe’s digital economic policies.
All of that might prompt compliance officers to reach for some antacids. We should also take this moment to ponder what expanded antitrust enforcement might look like in Europe, and how companies should anticipate what that landscape means for compliance.
- Antitrust & Competition Law (Basics)
- Antitrust & Competition Law (Advanced)
- Antitrust (Micro Learning)
First, the Big Concepts
Antitrust concerns fall into two broad categories. First, a company might become so powerful that it harms consumers, typically by forcing them to pay higher prices. A company can also become so powerful that it stifles competition from other firms, reducing the choices that consumers have in the market.
Of those two categories, Big Tech clearly falls into the latter camp. It’s difficult to argue that those companies harm consumers through higher prices, since most social media and Internet businesses give away their product for free. Instead, critics say, Big Tech harms other companies’ ability to offer alternate products.
Vestager is one of those critics, and that’s an important clue about where her enforcement priorities lie. If fostering more market competition is her goal, then Vestager will tilt more toward structural remedies that prevent anti-competitive behavior, rather than mere monetary fines after the behavior has happened.
Implementing structural remedies that change how a company conducts business — hmmm. That sounds like something compliance officers might handle.
So what would those remedies look like, and what capabilities would compliance programs need to have to implement them?
Interim Measures, Market Reorganizations & More
First, Vestager (or any other EU competition commissioner) could order “interim measures.” That essentially directs a company to pause whatever alleged anti-competitive practice the Competition Commission is investigating.
Interim measures are stronger than a request, but less than a consent decree that you might typically see at the end of an investigation. The Competition Commission has had the power to issue interim measures for many years — but never actually used them until several weeks ago, when Vestager imposed interim measures on a U.S. microchip maker. The measures will remain in place for three years or until Vestager finishes her antitrust investigation, whichever comes first.
More ambitiously, Vestager is also mulling changes to the burden of proof that tech companies would need to show to avoid anti-competition punishments; and may even seek the power to “reorganize” markets before Big Tech swoops in with behavior EU officials view as harmful.
In the extreme, Vestager does have the power to order the breakup of a large, powerful company. Politically, however, that seems like a can of worms nobody wants to open.
Much more likely is that Vestager will keep trying to cultivate measures that can change how a business operates: closer review of proposed M&A deals, divestiture of some operating units to win regulatory approval, consent decrees to guide certain behaviors, and the like. Plus her office still has that power to levy billion-euro fines, too.
4 Implications for the Compliance Function
Whatever brave new world Vestager brings about, for corporations (especially tech firms), the risks of regulatory enforcement are going up. That has several implications for corporate compliance, legal, and risk functions.
- More attention to anti-competitive issues in pre-acquisition due diligence. Compliance officers already should play a role in pre-acquisition due diligence to find potential trouble in bribery, ethical sourcing, money laundering, or related risks. Now companies will need to contemplate anti-competition issues as well.
- More attention to new products or services. One of Vestager’s beefs with Big Tech is that large firms start with one flagship product (online communities, search engines, e-commerce), and then start offering other services (messaging, mapping, travel booking) that compete with smaller companies. Companies will need to be better at analyzing potential regulatory consequences of those business development plans.
- A better ability to replicate or split off compliance programs. In more difficult cases, a company might need to expand compliance programs rapidly across newly acquired businesses, or to split off compliance programs with an operating unit that’s being divested. The skill to do those tasks will become more important.
- A better ability to freeze business practices under regulatory review. Remember those interim measures Vestager has shown a willingness to use. When a regulator tells a company, “Stop doing this,” that requires policies, controls, and monitoring to confirm that you’ve stopped.
We don’t know when Vestager will get expanded enforcement powers, or just what those powers might be. Still, those powers are likely to arrive eventually. Even if Vestager can’t use them herself before her second term expires, she could set the precedent for much more complex, nuanced EU antitrust enforcement for years to come. Compliance officers should plan accordingly.