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By Valentina Pop
BRUSSELS -- Margrethe Vestager made a name for herself as Europe's top antitrust enforcer by slapping record fines on U.S. tech companies. Now she says those fines don't work.
As she prepares to start an unprecedented second term as the European Union's competition commissioner, this time with added powers as the EU's digital-economy policy maker, Ms. Vestager is shifting her focus from fining giants to preventing market abuses.
Fines are "not doing the trick," she told EU lawmakers recently, despite having slapped Alphabet Inc.'s Google with penalties totaling $9.4 billion in recent years. "We have to consider remedies that are much more far-reaching."
Ms. Vestager already has the power to break up companies as a last resort, a step some Democratic presidential candidates including Sen. Elizabeth Warren have advocated. Ms. Vestager said that is not her intent. "My obligation is to do the least-intrusive thing in order to make competition come back," she said.
Instead, she pointed to national competition authorities in the U.K. and the Netherlands, which have the power to reorganize a marketplace before consumers or competitors suffer. She said the two countries have "tools that could be considered, to reorganize before harm is done."
Ms. Vestager should get similar powers, Dutch Competition Authority Chairman Martijn Snoep told a recent conference in Brussels. "We don't need tools to cure yesterday's problems," he said of the Netherlands. "Tools should be aimed at preventing [bad] behavior."
The approach departs from traditional punitive remedies because it addresses market conditions without casting blame. Britain's Competition and Markets Authority can order companies to divest parts of a business in order to improve competition, "but there's no liability, no fines," said Mike Walker, chief economic adviser at the CMA, at the same conference.
The CMA in July launched an inquiry into online platforms and their advertising businesses. A previous inquiry into the auditing sector led in April to the conclusion that audit firms Deloitte LLP, Ernst & Young LLP, KPMG LLP and PricewaterhouseCoopers LLP should separate their auditing and consulting businesses.
But while such powers exist in some EU countries, flexing muscle pre-emptively across the bloc wouldn't be easy because EU law requires the competition commissioner demonstrate harm before imposing remedies. Acquiring U.K.-style powers would be a "major constitutional step that would take a long time," said Matthew Levitt, a partner at law firm Baker Botts.
A tool Ms. Vestager has revived after nearly two decades is the option of ordering a company cease actions the commission alleges to be anticompetitive, even before a case is completed. Ms. Vestager in coming weeks is expected to decide whether to issue such an order against U.S. chip maker Broadcom Inc., something she threatened in June.
Expect more such injunctions in Ms. Vestager's second term, a senior EU official said. These so-called interim measures can be challenged in court, though, which legal experts say could backfire on the commission.
"If the commission loses in court and the interim measures are removed, then the commission may be discouraged from pursuing the case on its merits," said Thomas Vinje, a partner at law firm Clifford Chance. "And even if it does and succeeds, you still have a considerable delay" due to the legal challenge.
So far, Ms. Vestager last month suffered a legal setback in a court ruling siding with Starbucks Corp. over its payment of taxes in Europe. Google also in September scored a legal victory over French regulators in a European Court of Justice ruling that restricts the whole bloc's privacy orders, limiting the " right to be forgotten". Courts haven't so far ruled on any of her Google antitrust cases.
The commission can also make use of more far-reaching remedies instead of big fines, for instance allowing consumers more choice on a platform. And, it can be stricter about the enforcement of those remedies -- something it has done in the past, Mr. Vinje said.
In 2009, then-competition commissioner Mario Monti opened an investigation into Microsoft Corp. for allegedly abusing its market dominance in bundling its Internet Explorer browser with the Windows operating system. After hard bargaining, Microsoft agreed to give users the choice among a random selection of internet browsers.
"Ironically, this opened the way for Google's Chrome," on Microsoft's operating system, said Mr. Vinje, who argued at the time against Microsoft and has since represented clients who filed complaints against Google.
Ms. Vestager's second term is slated to begin when a new team of commissioners is approved by the European Parliament. Originally scheduled for Nov. 1, the handover has been delayed as commission candidates for other positions face scrutiny, and is now likely to happen later in the year.
Write to Valentina Pop at email@example.com
(END) Dow Jones Newswires
October 15, 2019 05:40 ET (09:40 GMT)
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