^singer*
When you walk in a room, do you have sway?
Im Kara Swisher and youre listening to Sway. Theres one name that gets all the tech bros shaking in their Allbirds no, not Kara Swisher, but thanks for thinking of me. Im talking about Margrethe Vestager, the European Unions top antitrust enforcer. Shes a regulator with a knack for hitting tech giants where it hurts, their profits. In 2019, she slapped Apple
The European Commission ruled today that Ireland must collect $14 and 1/2 billion in back taxes from Apple.
And then, a year later
Facebook has been fined 110 million euros by European regulators.
And in the last few years, shes gone after Amazon.
The company faces a possible fine of up to 10% of its annual worldwide revenue.
And her work is far from over. Her office is proposing new legislation that could force big tech to change the way it operates, legislation that could come into force next year. So where is Silicon Valleys, quote, tormentor in chief going next? Margrethe Vestager, welcome to Sway.
How are you doing?
Great, really good.
Wonderful.
Youve had a lot of big political wins over your many years as commissioner. And you and I have talked about them for a long time, and the fines against Apple and Google got a lot of attention. But lets start with a recent loss. The European Commission ordered Amazon to pay $303 million in back taxes to Luxembourg, but Amazon won the appeal last month. Did the court get it wrong, or is there some issue with the way you charged them?
Well, as we speak, its actually difficult to say. We think it may be some of the same reasons as to why we lost the Apple case. So right now, were analyzing it to see if we have good grounds to appeal. So far, it seems that some of the same issues as in the Apple judgment that we appealed to the general court of justice.
All right, let me explain. The European Union court sided with Apple last year in a fight over a $15 billion Irish tax bill. These are different cases. Why do you think the courts are ruling against you in these cases? Has it made you reevaluate your approach, particularly on the issue of taxes?
Well, two things. First thing is that it was always obvious that for real tax justice you need a change of legislation. You need not only European but also different global approach. And fingers crossed, it may actually come now, almost literally as we speak. And the second thing is that in every case, both the cases that we have won with Engie and Fiat, and the cases we have lost, Apple and Amazon, the court says you are fine to use your instruments. You are absolutely welcome to say, well, no state aid also come in the form of a tax credit. And also, member states, while theyre in their good right to design their own tax legislation, they must at the same time fulfill European laws. So as a matter of principle, the court has said you go ahead. But in these specific cases, you have laws, we disagree with you on some of the issues. And this is why we have been appealing.
Now, you said this you just said this may change right now. I think youre referring to the big news of the win scored on the idea of a global corporate tax. Treasury Secretary Janet Yellen, she scored a big win by getting the G7 nations to agree to a 15% global tax rate minimum, but the deal is nonbinding right now. Is this just political theater? Do you really think its going to have an impact on companies trying to relocate to tax havens?
Well, first and foremost, progress are way too slow for sort of my line of temper. But it is progress, and the fact that G7 agrees may pave the way for G20 to agree, may pave the way for an OECD agreement. But everything is in the implementation. If tax authorities are given the right resources and member states actually changing their legislation, then wed see real change on ground, because part of the work that we have been doing is realizing that complexity is part of what helps some businesses not to pay taxes as any other business. Because the first thing you feel once you open such a tax case is let me just close it again, because its crazy complex. And tax authorities, they need to have the resources to go into this in full, because otherwise it will not be possible to get the right taxation.
Do you think you were too aggressive in attacking Apple, because this was seen as a huge win, and then it didnt hold up. Do you think thats been damaging to authorities like yours that are trying to call attention to this, for one, and the second thing, to try to actually get companies not to do sweetheart tax deals, which is essentially what this is?
Of course, Ive been wondering that myself quite a lot. I think you have to do that when you lose a case in court. But I think the case in itself have given attention to the issue at hand. It has also given attention to the fact that you need to change legislation in order to get better results. And last but not least, we dont know what the European Court of Justice will say once they rule over our appeal.
Did you think about re-figuring your strategy, because taxes were an important part of, and its one of your main tools that youve been using here.
Well, its one of many tools. And the question of taxes is a very specific question, because there are so many other things that you should not do in the marketplace either to make it difficult for your competitors to compete against you. And I think its important to use every tool in the toolbox to make sure that we have fair competition, because if we do not have fair competition, we lose the most important drivers for innovation, for renewal in the marketplace, and obviously for affordable products for customers.
Yeah. Do you feel like when youre pushing on these deals, if you lose this a ability to attack them on taxes, that youll lose an important tool?
No, we will continue to do the casework that we do. State aid can come in many forms, but it can also come in the form of a tax benefit. So we can continue using our tools. I would, of course, prefer that it was not the case, and that I would on behalf of the huge majority of businesses who pay their taxes. Because I think that is one thing that should not be forgotten in the discussion about corporate taxation the majority of companies, they work very hard to make a profit. From that profit, they pay their taxes.
And how do you characterize these companies doing this? What do you say to them when they take advantage of laws that are just written to help them?
Well, I would not do the soul searching of the motives. I think there are lines where things may develop from tax planning into aggressive tax planning into tax avoidance. In a busy life, I dont think it makes much sense to try to search other peoples souls. I think my own is complicated enough.
OK, all right, low tax countries like Ireland arent happy about this. What are the chances of a global tax system actually succeeding?
I think the chances of success is probably better now than what they have been for a very, very long time, because of the fact that the Biden administration had a completely different approach to this compared to the previous administration. That was a key to unlock the situation. And the European members, they have been pretty much together in the discussions before. And that position, of course, is maintained. So the fact that the U.S. is changing you saw at the G7 how that changed the approach. So if it can happen, I think its more or less now. The momentum is there.
The momentum is there to do that. Will global taxation make global regulation easier?
Well, the tricky thing is, of course, that we do not have a global taxman. We have all these many, many jurisdictions. And same goes for competition law enforcement. We have global companies, but we do not have a global jurisdiction. And only now is there an alignment of minds, and that may allow us to see the same sorts of legislation passed in multiple jurisdictions, so that you get a regulation that has the same direction, even though you dont have a global authority.
Would you like there to be a global authority on regulation on issues like this, given that these are global companies?
From a pragmatic point of view, it would take so long for that to be effective. And you need competition law enforcement now, because it is as we speak that businesses are being closed out of the marketplace because of the behavior of other businesses.
Right, absolutely. So when this happened, you were saying you dont soul search other people. Did you soul search yourself and say, oh, its like pushing a rock up a hill and then down it goes again.
Yes. And unfortunately, I think the soul search is deeper when you lose than when you win, because on the same day as we lost the Amazon case, we won the Engie case. And I havent had a single question about that. But one of the things that Im still really motivated by is the fact that fair competition is one of the most important drivers also out of this crisis that were in right now, because it drives you to be innovative. It drives you to treat your consumers better. And taxes, they are part of this. And businesses, they should contribute to the society where they do their business.
Well, that would be nice. All right, but taxation is one way youre getting them to pay. I want to talk to you about how youre regulating. Lets start with antitrust. We can start with your latest antitrust case. Just last week, the European Commission announced a formal antitrust inquiry into Facebook, taking aim at its Facebook Marketplace service, which is sort of like an eBay. Explain why this case matters.
The Facebook case, we do that actually in a very close coordination with the U.K. competition authorities. It is a specific case on part of the Facebook advertising, but its a data case, so its about the use of data for these advertising purposes. Why it matters is that if we as consumers do not get competition in advertising, eventually the ads we get, they will be poor in quality. And we may not get the offers that we really want to see. And the advertising market used to be a market with quite a lot of competition, where you could place your ads with different ad providers, and if all of a sudden its not possible for those who place ads actually to do this because of the use of data on the platform, well then, eventually, we as customers, we would be losing out.
So I want to also know whats going on with the Spotify case. Youve accused Apples App Store of antitrust violations, basically alleging the App Store gives preferential treatment to Apples music streaming service. If Apple loses, it could face a fine of up to 10% of its annual turnover. Fines make good headlines, but are fines the right remedy when its really needed is to change bad behaviors? Talk a little bit about this case.
Yeah, the Apple music streaming case is about the way Apple treats competitors to their own products. Here, you have Apple Music. Then you have Spotify, Deezer, SoundCloud those will be familiar European names, at least. And here, if you want to subscribe, you will have to pay a 30% commission fee. And also, if for instance, youre then Spotify, you cannot tell your subscribers that you can get it without the commission fee if you sign up via the Spotify website. And that lack of communication that is simply forbidden of course makes it really difficult, because if you sign up for Apple music, youre not paying the commission fee. So even though you could avoid the commission fee signing up via the website, youre not being told that this is possible. And that squeezes, of course, the margins for the other music streaming providers, and it makes the competition unfair. For most things, if you subscribe to it, and you stop subscribing, they would come back and, say, why were you not happy, is there something we can do for you. Not even that can you do. And that, of course, makes it very difficult.
What are your chances of succeeding here?
Well, I think its really important, because what we see is also that in Europe, Apple would hold like 30% of the marketplace. But the thing is that once you have an iPhone, they hold a de facto monopoly of you getting apps on your phone. And of course, its really important, because its a case about what should be the acceptable de facto monopoly behavior in these markets. And the second thing is that, hopefully, it can also pave the way for a proposal we have tabled that if you are in such a position as Apple are, they should allow for another app store on their phone. If Im not happy in the supermarket with the prices or the choices, I just go to the next one. This, we have accepted not to be the case in app stores for a really, really long time.
What do you make of their argument that theyre providing safety, security, theyre vetting apps and things like that.
Of course, thats a really important argument, because we want things to be safe. We want them to be tested. But we dont want safety and testing to be something that you can use to make life difficult for your competitors. And in the Apple Music streaming case, well, you see very different conditions depending on what kind of apps youre dealing with. So I think its an important argument, but neither safety and security nor privacy should be used as a dike against competitors.
So what do you think of the current Apple Epic case here in the US? Thats another case that goes after Apple on antitrust concerning the App Store. Are you talking with their lawyers? Or do you just hope that theres all kinds of lines of attack on the same issue?
No, we follow, for instance, the hearings on the Epics case very close, because there are a lot of similarities. And I think part of the Epics complaint could be solved by allowing a second App Store, because then they are looking for some specificities in how they engage with their customers.
So when youre looking at cases like this, when youre saying a second App Store, Apple could say, look, why should we let another company take advantage of our platform that we built and let them run wild on it? That would be their argument. We believe in privacy. How do we know theyre going to be private? How do we know theyre going to be safe? We paid all this money to create this thing and are taking economic advantage from that
But its its fair enough. But on the App Store, as you see it by now, well, here you see the different treatment of different apps. Some apps you dont pay for, theres no commission fee. Other apps you pay for, theres a very high commission fee that Apple do not pay themselves for where they compete against. And I think every one of us, we would expect if we were to place another app store on our phone, that the people responsible for that app store, well, they would, of course, deliver us a safe place to do our business. But there is a thing when you are in a dominant position, as you are when you provide an operating system, and you put your own products in that rein of that operating system. And that, of course, is what is at stake here, because if we do not have a marketplace that gives room for that kind of innovation, well, then were kind of stuck in the situation that were in right now.
Is there any other solution besides the second app store? Could you regulate them, or regulate the commission fees? Or is there any other way to deal with this and not have a second app store or you think thats the only way?
Now, I think a second app store, that is in the future. That will take time, because its in a legislative proposal that we have tabled in front of the European Parliament. But I would hope that we could conclude this case in good time. And then wed see how to remedy this. Depends, of course, very much on the Apple answer to our concerns. Some of the music streaming services, the smaller ones, theyre not doing too good. And no one can judge what would actually be the market performance of those who are still doing quite well. We have seen in other cases how damaging it can be if things takes a lot of time then the market moves on. So obviously, we never compromise on the quality of our case work and on due process, but we need speed, because a digital marketplace and a digital world is a world where things are moving fast.
One of the themes youve had here is how long it takes and how much power and really teeth you have to actually enforce these laws. Tech moves fast, regulators and courts move slowly. The European Commission slapped Intel with a $1.45 billion fine back in 2009. Intel appealed and then lost. Then in 2017, the European Court of Justice ordered a new trial. They still havent paid the fine. In the meantime, tech companies can keep up with their behaviors. How do you get it to work faster? Because it feels like a giant game of whack-a-mole with what youre doing.
Yeah, this is exactly why we call in the cavalry. This is why we table proposed regulation. And one of the things that takes quite a lot of time in our work is to prove that a company is dominant. Only if youre dominant, you have these responsibilities. And what we have tabled now as proposed legislation is to say, well, if you buy these objective criteria, qualitative and quantitative, will be designated as a gatekeeper, then from the very first day these are the things that you cannot do. These are the things that you have to do. Have to do could be make room for a second app store. Have to do could be share data. Cannot do could be that you cannot lean into a neighboring market in order to promote yourself if you cannot compete on the merits.
All right, so you have a reputation of being tough, but not everybody agrees. The finance and economic ministers from Germany, France, and the Netherlands recently said the EU isnt doing enough to crack down on a flurry of mergers and acquisitions. Facebook, Amazon, Microsoft, Google, and Apple acquired over 800 companies in the last 30 years. Are you doing enough to crack down on mergers, which also gives them a huge advantage given they can come in and scoop up these companies, not just control the platforms, but control innovation going forward.
We just intensified our work with the national competition authorities of the European Union in order to see are you actually buying your future competitor. Because we have seen that in a very innovative start up scene in Europe, we have a lot of acquisitions from big tech. And that, of course, is of our interests to see why this is happening.
So have you made enough aggressive moves here to crack down on them?
Well, I dont think just as well as panic is never a good response to anything, I dont think aggression is the point here either. But I think to be really targeted in the work we do, both regulation wise to pass regulation that regulate what you can do and what you cannot do if you are a gatekeeper and at the same time vigilantly enforcing our competition rules so that we make sure that you cannot just destroy future competition, that you cannot lean on a neighboring market to your own benefit. And we do need both.
But just as with taxes, they dont have to do it. Theyre not going to do it. This is part of their imperative to be bigger businesses. Its your imperative to slow them down, but its not their imperative to be smaller.
No, our point is not to say that they should be smaller. Our point is to say that when in the marketplace, they should take the responsibility that comes with the kind of power you have when you are this size.
So the big argument tech is making is that regulation stifles their ability to innovate. They point out how few multibillion dollar and trillion companies are coming out of Europe in recent decades versus the US, where regulations are lighter. How do you respond to that argument?
Well, the only thing that regulation and competition law enforcement stifles is innovative attempts to break that regulation and antitrust law enforcement, because I think that, indeed, its about time that democracy catches up and get a bit ahead of technology, because its not by our publicly elected representatives that our society is being shaped. It is by corporate business. But it is 100% legitimate for our elected representatives to say, this is the framework within which youll have to go compete. And yes, that puts a brake on something, but then its democratically decided. And I think that is perfectly fine. [MUSIC PLAYING]
Well be back in a minute. If you like this interview and want to hear others, follow us on your favorite podcast app. Youll be able to catch up on Sway episodes you may have missed, like my conversation with Senator Amy Klobuchar. And youll get new ones delivered directly to you. More with Margrethe Vestager after the break. [MUSIC PLAYING]
So lets move on to privacy. Back in 2018, the commission got a lot of praise for enacting the General Data Protection Regulation, or GDPR. It was aimed at stopping companies from exploiting EU citizens personal data. Three years later, one of the only big tech companies that got fined was Google, which was fined about 50 million, which is like pocket change to them. How are you thinking about GDPR three years hence.
Im a bit disappointed in the marketplace, that it has taken so long to have a market response let these new services help you enforce your rights when it comes to privacy. That has been really slow. And obviously, authorities in member states, theyre still working together to find the right level of enforcement when it comes to privacy, because privacy regulation and the citizens rights here, they are not just for bigger companies. Theyre for all companies. So we still have work to do in order to get the enforcement right and for people to feel that they have the power of their data.
So the European Commission is proposing whats coming up next, the Digital Services Act and the Digital Markets Act. Explain to me whats in these acts and why the commission wants to update the rule books to reign in. Explain exactly whats in them.
Well, the regulation Ive been talking about is the Digital Markets Act. Its the one that will harness what we call gatekeepers. Second, Digital Services Act, will basically make sure that what you get offline is also what you get online, for instance, that products are safe, and that platforms, they know the merchants doing business via that platform so well that they knew that these merchants will actually live up to that kind of responsibility. For instance, as an importer, that you can complain about your products, that the products are safe. And the second thing is about the services. If your post, if your profile is taken down, that there is somewhere where you can go complain about it in order to sort of maintain freedom of expression while at the same time being much stricter on the obligations to take down what is considered illegal in a member state. That could be incitement to violence, child abuse, bomb recipes, that sort of things.
So the Digital Service Act is more about content moderation. The Europeans have a different view on that than the Americans. How far should governments go to spelling exactly what amounts to acceptable and unacceptable speech? In the United States, its impossible because of the First Amendment. Facebook has a First Amendment right, for example. How do you balance free expression with the open internet?
So also here is a balancing act, because obviously freedom of expression is of the essence. But its really needed that we get more aggressive on all the illegal content out there. Our proposal does not say anything about what you say. It says something about how should you process that what is illegal is taken down, but what may be hurting or harmful or somewhat damaging, but which is not illegal, can actually stay up. And that, of course, is a really tricky thing to do. And this is why we are suggesting a more, I think for the platform, cumbersome procedure, that if something is taken down and people complain about it, that they have somewhere to go complain about it and they have a fair chance of getting their post back up again if what they have said is actually not illegal, even though it may be harmful to someone or hurting to someone, but not illegal.
Well, should that be the government doing that, or should it be the private companies.
It should be an independent body to assess this, so that things can be aligned.
All right, so thats a very difficult process, given the amount of data that comes across these companies all the time. Now, should private companies be held liable for actions like January 6th, for example?
Well, were very careful when it comes to liability. And to a very large degree, we sort of maintain the basics here, that you are a platform, and as such, youre not liable as to what happens there if it is obvious who is the sender. If people would make the obvious mistake that its actually you, a platform, who is responsible for this, then you may fall into a different category, but were still working on the question of liability. And we will come back to that later this year.
Do you think they should that companies like Facebook and others should be liable for January 6?
I think this is really tricky. What we think is that you should lift your responsibility away before it gets to that, because that kind of incitement to violence would be illegal, I think, in every EU member state.
So Facebook just announced last week its banning Trump for two years and it had to do with January 6. What do you make of the decision?
Well, I kind of understand the decision and why they felt the need to do something. What we would want is that that is not just a decision that they unilaterally take, but that you have a system so that you can actually discuss that and you also have some rights. That, of course, should be held up against the terms and conditions that you have signed up to.
But they tried to do that. They tried to give it over to their oversight board. What did you make of the board that theyve created that is allegedly independent, and this is what its supposed to do it shoved the decision back to Facebook, saying youve got to make laws about someone like Trump.
Well, I think its important that these processes, they are bound in legislation, so that people know what are their rights. If its a body set up by a private company within sort of the rein of that private company, of course, its a different thing then something that is guarded in legislation.
And do you imagine that would be workable in any sense?
Well, youre completely right to say that this is troublesome. And it will take a lot of resources. But the problem is that the alternative can be really undermining freedom of expression. But youre right to say that, obviously, this is so much more troublesome than just sort of a blanket, say, you take down what you think is illegal and well leave it at that.
Do you agree with their decision to remove President Trump from the platform?
That I have not thought about.
Come on. Really?
No, because Im not myself an active Facebook user. And I dont know what would be the ups and downs. I dont know what they have been considering. I dont know what are the details.
How do you look at his behavior online?
Well, I myself was surprised that one could express oneself as the former president did without any consequences until the very last minutes, so to speak, when you look at the terms and conditions that everyone signs up for.
I see. I think thats a yes. By the way, Donald Trump called you Europes tax lady. He also accused you of hating America. Trump told Fox Business, She hates the United States, perhaps worse than any person Ive ever met. Do you recall that?
Yes, I recall it. And it was really strange, because Ive never met President Trump.
Yeah. Well, anyway, President Biden is traveling to Brussels this month. How much of digital and tech is going to be on the agenda if you meet with him? And what would you like from the Biden administration?
First and foremost, I think its really, really good what the Biden administration is doing on taxation. The fact that there is now a G7 agreement may pave the way for a real global agreement when it comes to taxation. So obviously, I would encourage continuation of this line. But also, it will be really interesting were trying to create what we call a trade and technology council in order to have such a high level format to discuss everything from AI to standard setting. And hopefully, from that starting point, creating maybe a larger coalition of democracies to deal with some of these issues, because your take on technology also becomes your take on democracy.
I have to ask about your political future. You were once going to try to be the President of the European Commission. Are you still eyeing that post?
I have three and a half years left of this mandate, so I have not considered that for a second. When I didnt make it the last time, I spent between 15 and 20 seconds considering if I should be bitter and contesting for the next five years. And I figured out that that would be pretty harmful for me, but the rest of the world probably wouldnt care. So I took the choice to engage fully in my job and I really enjoy it. And I admire and respect the president that we have.
If the global tax authority or global regulatory authority emerges, would you want that job, to be the global tax cop?
Well, yes, if I can make it to 150, because I think thats the kind of age it would take to get to a global tax authority.
Just so you know, Jeff Bezos just announced hes going to space, so maybe global tax policy wont work for him if hes not literally on the globe. But perhaps you can extend it to Mars.
Well, first things first, now were working on space traffic management. I think its a good thing to get started. And that should be global as well.
OK, all right. I think thats perfect. [MUSIC PLAYING]
Sway is a production of New York Times Opinion. Its produced by Nayeema Raza, Blakeney Schick, Heba Elorbany, Matt Kwong, and Daphne Chen. Edited by Nayeema Raza and Paula Szuchman, with original music by Isaac Jones, mixing by Eric Gomez, and fact checking by Kate Sinclair. Special thanks to Shannon Busta, Kristen Lin, and Liriel Higa. If youre on a podcast app already, you know how to get your podcasts, so follow this one. If youre listening on The Times website and want to get each new episode of Sway delivered to you by a tax lady who loves Americans, download any podcast app and search for Sway and follow the show. We release every Monday and Thursday. Thanks for listening.
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