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“In Europe, You Cannot Be So Big That You’re Above The Law” A Conversation with Margrethe Vestager

This interview is available in French and Spanish on the Grand Continent website.

The president of the European Commission, Ursula von der Leyen, has stressed her second mandate will be about competitiveness. The European People’s Party, her political family, has been vocal about emboldening business and having less regulation. What does this new priority mean for competition?

Competition is a driver of resilience in the supply chain and a source of innovation — you have to do better than your competitors otherwise you are out. That is healthy. However, when it comes to scaling up, in Europe, we need a market that works. We have taken a number of steps in order to make the single market work better, but there is still so much more to do.

What are the main priorities you identify?

The European Commission, internally, can be better at coordinating. But we have to complete the single market : even though we have areas where there is a European market, we also have significant barriers. The most challenging aspect is the lack of a single market for capital — we cannot scale up a business without capital. We are faced with the paradox that European funding is investing in European businesses in the United States. That is painful. We need to find ways to deploy all that patient capital to meet urgent financing needs. It is the role of the Commission to use its convening power to make Member States come together and discuss how these barriers can come down. If the Commission is not willing to use the hard tools such as infringements, it becomes extremely challenging to find constructive, fast solutions. There needs to be some deterrence. Dynamics and timing are crucial in this process : we need to find an agreement, implement it and do it as quickly as possible.

Last week, President Emmanuel Macron said one of the fundamental problems facing Europe is that it has overregulated and under invested and that has created a suboptimal situation. Do you agree with that assessment? 

I do not know how he measures that and I would find it difficult to say that.  

One of the ambitions of the Ursula von der Leyen Commission has been to regulate where absolutely necessary, otherwise invest. If we look at the AI Act, the goal was to create trust so that we could use AI in situations that are critical for the individual. That helps create a market. But what some fail to see is that the Commission’s proposal was also the launch of investments in AI.

There is a perennial criticism that competition in the EU has been so focused on fending off the big American corporations, the Big Tech, that it neglected creating internal market conditions for European businesses. 

We associate the word regulation to reporting, control, and permitting, but regulation can be much more than that. When we look at the market creating legislation, if a foreign company wants to sell its product in Europe, there are demands that need to be fulfilled. Surely we need to do more in terms of, for example, simplification: in the case of reporting, we need to have a one stop reporting system where businesses can report to a single entity. Massive digitization would help dramatically. Instead of doing things in sequence, which takes much longer, we can do it in parallel. 

There are sectors who say they need more, but significant progress has already been made. In terms of innovation, if we look at the many unicorns that have come out of France, that to me means there is an innovation ecosystem that is working. 

To address the competitiveness challenges identified in the Draghi report, what is the role of competition policy?

For me, it is important to be nuanced if we are to move forward. Competitiveness is not a pandemic where the problem materialises in a matter of weeks. Deteriorating competitiveness is a gradual process, it is something that erodes over a period of time. Europe’s productivity growth is low. There is no silver bullet to fix it. With Covid, it was clear that we had to act together and quickly. It was a matter of life and death. The erosion of competitiveness is also a life-or-death situation, but it takes so long that people do not realise they are standing on a burning platform. 

It is, as Draghi said, a «slow agony»…

This is one of the many qualities of the Draghi report: it presents a burning platform. The energy issue, the security issue, these are structural changes that have happened while productivity hasn’t grown, which means they have to be addressed, and even if we were ahead of the United States and China, we should still be addressing them. It’s important that we understand that this is the key to maintaining the European economic model that delivers welfare societies. Europeans expect a good education, mostly free, a functioning infrastructure, access to good health services.

Would you say that the ability to maintain this social model will be the ultimate measure of European success?

Yes. That is what makes us Europeans. People sometimes think it is just a slogan when we say we need a just transition, that we need to make sure people are not left behind. But this is the actual European model, what makes Europe so different. It’s our system, and that’s an independent reason to make sure that our economic model can develop so that we can maintain it. 

We do not want to be Chinese, absolutely not. I don’t think we want to be American either. If we were more loyal to what has made Europe what it is and what works for us, then we could keep renewing ourselves to deliver. The task ahead is not about changing our model. I have a grandson and I think a lot about the future. It’s more important to me that he has access to a good education and good services than that he has some shares in the stock market and pays for private insurance. That is a very American way of looking at the world, which is very rare here. We don’t need to imitate it.

The Draghi report states that Europe needs 800 billion euros in fresh money for investments annually. That obviously brings up a lot of questions. I don’t see how your home country, Denmark, at this point, can get onboard with that. I look at Germany, I don’t see how this is going to fly in this political climate. But the flip side is, if this is truly existential, then it merits a debate. The urgency of the moment and politics by inertia don’t seem to match.

I think the discussion should be the other way round: first we need to agree on what we need to do together.

And not about the 800 billion euros?

No, because maybe it is 700 billion euros, maybe it’s 810 billion euros. The first question for me is: what for? I think it’s normal. If I came to you and said: Listen, give me 10.000 euros for mutually beneficial projects, I think you would say: I don’t know. Should we discuss what projects would be good for us first?

Money never solves the problem in itself. In Denmark, we have a saying: as a measure of last resort, throw money at it. But most problems are structural. Very often, when you throw money at something, it makes a problem go away for some time, and then it comes back because you never addressed the structural reasons for it. And this is why I find the question on the projects motivating.

The obstacles that Draghi outlines in the report will persist. They are in energy, they are in security, they are in knowledge.

We need to invest much more in common defence capabilities: It is regrettable that our defence industry operates in a fragmented manner, with Member States pursuing their own agendas. So that’s one area. Then there’s energy, and the grid. Investments in this sector would also be immensely beneficial. We need better interconnectivity.  And then we have knowledge. We need to invest in people and skills. If not, you can have all the money in the world, and it will not help you.

The Draghi report also emphasized that the EU may have to revamp competition rules — and pitched a new competition tool. Were you surprised?

The new competition tool — some Member States have it, the  Competition and Markets Authority in the UK has it too — allows you to look into a sector where you have the suspicion that it has become too concentrated, that it has become unhealthy and not dynamic anymore. Instead of having specific cases, you work with the sector to make sure that it gets dynamic again. 

It was a discussion that we had before we crafted the Digital Markets Act. One needs to take it step by step. The discussion we had back then was reluctant because the new competition tool means more competition. We looked over the last 20, 25  years, European markets have become so much more concentrated because of market dynamics. The markups are higher, the profits are higher, yet the efficiency shared with consumers, not so much. I won’t be Competition Commissioner for much longer, but I would say: let’s look at those who have it already—the UK, Germany, Netherlands—and see how it works for them.

There are clear tensions within the EU when it comes to China. There’s a number of Member States who believe this is ultimately a predatory economy and others who think it’s crucial to maintain that economic relationship as it is now because they need it. Looking to the future, how much of an issue is China and the divisions around it going to be for the EU?

It takes two to tango, but let’s be clear: China has built overcapacity in many essential sectors compared to the demand in the global market. The idea that we would just sit back and wait for our sectors to die — as happened with the solar panels? No way. We focus on a dynamic single market with fair competition. This is why we control state aid, why we have a foreign subsidies instrument and the carbon border adjustment mechanism. We can impose tariffs because we think that this is unfair competition. It is completely legitimate to say the Chinese have built gigantic capacity, a lot of it with massive state subsidies, and we’re not going to become the dumping ground for all that overcapacity at the cost of European businesses. This is legitimate. 

We would like to keep trading with China, but it must be within a framework where we do not take economic security risks. There is plenty of market left once you have catered for economic security risks. It is really important to send that signal. 

When it comes to the Trade and Technology Council, a format created to establish dialogue between the EU and the US under the Biden administration following the Trump presidency and in which you have invested heavily, can it survive the next US elections regardless of who wins?

No matter who wins, it will be extremely useful because we need a structured forum to talk. We have disagreements — and not only on China — but we also have common interests. The premise has been clear from the very beginning. This is without prejudice for legislative processes in each jurisdiction. It has been helpful to have a better understanding of each other, it has allowed us to have a working relationship, and to create a network. That was very useful when we crafted the first sanctions against Russia after the invasion of Ukraine, for example. 

Social media is taking up in the political discourse in both the US and Europe. When you look at Elon Musk, he’s become a big, powerful voice in these debates. Do you worry about the implications for democracy in Europe and how do you believe your US counterparts will end treating this question?

I will not guess how that discussion will develop. But if we look at something which is now seen as completely plain vanilla in Europe, like privacy: in the US, 15 states have privacy legislation, not all the same, so you have a completely fragmented market. California  is passing AI legislation. How would that work? Would that fragment the US market? The fact that there isn’t a federal approach means the least you can do is to have a discussion, because there needs to be an understanding of what this is all about in the end. In Europe, with the Digital Services Act, we have had this back and forth of people screaming at us “you’re censoring!”

That’s the criticism: that you are deciding who gets to have a voice through these tools on social media. Someone like Elon Musk would say he’s a truth maximalist. The previous version of Twitter was fine by you, but now X has become a problem.

It has nothing to do with freedom of expression because the Digital Services Act doesn’t regulate content, it imposes that you have procedures in place. First, horizontally, so that your services cannot be hijacked to undermine democracy, for instance, by the amplification of very polarizing content or be damaging to mental health, which I think is a normal task for a service. You wouldn’t feed a child out of a toxic bottle. It is normal to ask for a product to be safe. Second is that you have a mechanism to take down illegal content if it is flagged as such. A lot of content is being taken down today without anybody telling you it’s being taken down. This is providing transparency. If your post gets taken down, you still can complain about it, go to court, and have it decide if it is illegal or not due under the law of the land. This is how it will work in Europe. 

Every Member State has legislation of what is illegal. Incitement of violence in my country, that’s illegal ; hate speech toward minorities, it’s illegal. But the European Union doesn’t decide that, it’s national legislation. What we have decided at the European level is that you have to be able to enforce it. When the DSA works, you will be notified. If you don’t agree, go to court. That’s not censorship, that’s transparency.

As your tenure draws to a close, what key insights do you take with you? You were among the first commissioners to gain significant recognition and an international profile. However, the second mandate proved more challenging than the first. Overall, do you feel your decisions were validated?

The fact that the court has made a full stop and a win for the Commission both in the Google shopping case and the Apple tax case says: “You were on track and you were on the right track”. Both cases — in different ways — illustrate the fact that nobody is above the law. You cannot be so big that you’re above the law. What the European Commission is doing is to make sure that the small guy has a fair chance. We are a large team, and we play different roles. That is public service and it’s been an incredible privilege to work with them.