Ice queen strikes fear into hearts of global giants

By Samanth Subramanian

Large American multinationals aren't used to being stymied overseas, writes Samanth Subramanian
Margrethe Vestager defends one of the EU's foundational philosophies. Photo / Jasper Juinen
Margrethe Vestager defends one of the EU's foundational philosophies. Photo / Jasper Juinen

The Black Diamond library sits at a slight forward slant on Copenhagen's riverfront, resembling a pair of Borg spaceships peering into the water. On the morning of a European Commission citizens' dialogue in early February, the building's coal-dark facades were slicked with rain and mist, but more than 100 people had trooped into its auditorium.

The event was an episode in a travelling roadshow in which the 28 European Union commissioners -- one per member state, each with a portfolio such as trade or transport -- take turns fielding questions and explaining their policies.

One of the two commissioners anchoring the dialogue was Margrethe Vestager, the Danish politician who has turned into a heated celebrity as head of the EU's directorate general for competition.

Her job as chief sleuth requires her to protect the union's vision of a fair market, and she's set about it with gusto. Last August, Vestager announced that Ireland had granted Apple illegal tax benefits, and she directed the company to pay more than US$14 billion in back taxes and interest.

It was a rare boulder slung at a Goliath, and it drew cheers in many quarters in the US and overseas.

Vestager's entire tenure has been laced with an instinctive mistrust of big corporations. She's driven investigations of Amazon.com, Fiat, Gazprom, Google, McDonald's and Starbucks -- and she still has two and a half years remaining in her term. Rulings on McDonald's and Amazon, both under scrutiny for their tax deals with Luxembourg, are imminent.

If Vestager levies a multibillion-dollar fine against Google -- a distinct possibility because the company is fighting three separate European antitrust cases -- she will truly set headlines aflame.

As with Apple and Amazon, these cases were bequeathed to Vestager by her predecessor, but she's accelerated them to their finish lines.American furyLarge American multinationals aren't used to being stymied overseas, and Vestager's consistent readiness to face off against them has provoked a startled fury.

American fury

Tim Cook, Apple's chief executive officer, called the tax decision against his company "total political crap". And a group of 185 American CEOs appealed directly to European heads of government to reverse the ruling, describing it as "a grievous self-inflicted wound".

Even the US government has felt the need to speak out. A white paper released by the Department of the Treasury last August criticised Vestager's office for acting like a "supranational tax authority" and setting "an undesirable precedent".

In late March the office of the US Trade Representative reiterated its opinion, as part of a broader report, that Vestager is deviating too far from prior case law. One former Treasury official from the Obama Administration said Vestager's staff resembled "a bunch of plumbers doing electrical work".

None of this has dissuaded Vestager, who continues to defend one of the EU's foundational philosophies -- that a well-policed economy yields the largest and most widespread benefits for society.

At a moment when the EU is convulsing with fresh doubt -- impelled by Brexit, various species of populist nationalism, Greek frailty, Russian meddling, and a disenchantment with eurozone debt -- Vestager has become one of the most visible, vocal champions of the union.

This year she made Time magazine's list of the world's 100 most influential people.

"I think she's tough and serious," Anthony Gardner, the US ambassador to the EU from 2014 to 2017, says. "I would even call her a superstar."

Picture of diligence

A year shy of 50, Vestager radiates efficiency and self-control.

She never slouches; her clothes appear polished but comfortable, picked out for long working hours; not one movement is superfluous.

Even her hair has been cropped short for years, as if to give her one less thing to do every morning.

During the Black Diamond event, she was the picture of diligence.

When the panelists sat down, she uncapped water bottles for them; when the moderator conducted a set of quick audience polls, she took photos of upraised hands; when Financial Stability Commissioner Valdis Dombrovskis talked about Europe's wind-power industry, she twisted in her chair to listen to every word, not looking away from him once.

In speaking about her work, Vestager is always fluently, adhesively on message.

Even cursory attendance at her speeches and press events is enough to become familiar with her talking points. She frequently invokes the Treaty of Rome, which founded the European Economic Community 60 years ago, as a way of situating her office and its mission in the very headwaters of the EU.

She likes to say Europe welcomes business of all kinds.

"If you win on the market, that's fair -- we'll congratulate you," she said at the library. "But if you cheat on the way up, then that's for us to look at."

Trump and protectionism

Someone asked her if she'll be warier of acting against American companies now that Donald Trump is President. The audience tittered uneasily. Nothing would change, she replied.

"We're not going hard at US companies specifically. It's not your flag that matters to us. What really matters is: If you want to do business in Europe, you play by the European rule book."

This was another of her well-worn aphorisms, but it masked the latest international wrinkles. Trump has already shown himself to be volatile on trade policy, reflexively defensive of US interests, and an intermittent advocate of the collapse of the EU.

His protectionist swagger has rattled Brussels; in March, Jean-Claude Juncker, the chief of the European Commission, warned that relations with Washington "have entered into a sort of estrangement", and that any American tariffs on European products will trigger swift reciprocal action.

If this happens, Vestager's office will become even more politically charged, liable to be deployed in retaliation and to attract even more American anger.

Ice queen

Vestager began her political career in 1988, at 20, working for Denmark's Radikale Venstre -- in direct translation, the "Radical Left", though the party is habitually cast as the Social Liberals. Its principles are centrist, leaning toward economic conservatism.

Vestager's maternal great-grandfather helped found the party, and her parents were members. Lutheran pastors both, the doors of their house were open to anyone who wanted to drop by for advice or spiritual succour.

Vestager rapidly shinned up the party's ranks. When she was 29, she was put in charge of two ministries, education and ecclesiastical affairs, and served on several government committees. Her reputation as a thorough but prickly -- even callous -- politician grew.

Almost inevitably, she acquired the label "ice queen".

In the fall of 2011, Vestager's career reached a fulcrum. A conservative government, convinced it made fiscal sense to cut unemployment and early retirement benefits, staked its survival on the issues by calling fresh elections. Vestager supported the reforms, but she befuddled everyone by declaring her allegiance to an electoral alliance of left-leaning parties that were promising to roll back the austerity measures.

When the coalition won, Vestager and the leaders of her allied parties hunkered down in a hotel on the outskirts of Copenhagen to wrangle over policy details and cabinet positions. On the question of cutting welfare, she refused to back down -- part of the reason the negotiations lasted three weeks.

At one point during those weeks in the hotel, Vestager realised she was in control of the parleys, and she made an audacious demand: the finance ministry for herself.

Apple CEO Tim Cook speaks as he attends the Economic Summit. Photo / AP
Apple CEO Tim Cook speaks as he attends the Economic Summit. Photo / AP

As she expected, Helle Thorning-Schmidt, the prime minister-elect, declined. Vestager called the marriage off.

After a day, Henrik Kjerrumgaard, her communications adviser at the time, recalls, Vestager invited Thorning-Schmidt to her house.

Thorning-Schmidt offered Vestager a troika of titles -- deputy prime minister, minister of the economy, minister of the interior -- amalgamated into a single job just for her. The austerity measures remained in place.

Four years after taking over a small, flailing party, the minister's daughter had become the second-most powerful person in Denmark.

Through the thick of the recession, Vestager struggled to revive Denmark's economy. In 2012, trying to explain the inevitability of austerity, she let slip a stray remark -- "That's how it is" -- that went viral; she was eviscerated for being uncaring and out of touch.

That same year she chaired meetings of Europe's economic and finance ministers. Relying in part on that experience, Thorning-Schmidt named Vestager to the European Commission in 2014, where Juncker put her in charge of competition.

Within the EU, the DG Comp -- the directorate general for competition -- considers itself an enforcement agency, wedded only to the rule of law and above the politicking that riddles the bureaucracy elsewhere.

With the research capacities of a 900-strong staff, Vestager makes decisions related to cartels and antitrust, approves or rejects mergers, and investigates state aid cases, in which member countries single out companies for unfair advantages such as tax breaks.

In the US, state aid by way of targeted tax incentives is a legitimate strategy to lure investment; in Europe, it's a forbidden tactic.

Biblical patriarch

Commissioners come into their offices with varying objectives. "Vestager has made the tax investigations a very big priority indeed," says Gert-Jan Koopman, a deputy director general in DG Comp.

He disagrees with the perception that Vestager nurses a vendetta against American companies. The splashiest cases of her tenure -- Amazon, Apple, and Starbucks -- were all opened by Joaqun Almunia of Spain. "It's very unreasonable to claim that she proactively decided to go after these companies," Koopman says.

The numbers bear this out.

Of the 276 companies involved in antitrust cases opened by Almunia, 39 were American; in Vestager's term, the breakdown is 11 of 81.

The friction between corporate America and DG Comp is in some manner cultural. American executives are often flummoxed when Vestager discusses competition law in the severe moral terms of a Biblical patriarch.

"When we have a case and you take away the specifics and the technicalities of the law, what you find is basically the same as Adam and Eve," she says. "It's about greed -- wanting to have something and taking a shortcut to get it. Or sometimes fear -- fear of being driven out of the market if your competitors are growing into a strong position."

Meetings between American CEOs and competition commissioners can go badly.

As ambassador to the EU, Anthony Gardner, met often with visiting CEOs on their way to meet Vestager and gave them an informal lay of the land.

"I was very clear with them. Don't go in and lecture. It won't work with her," he says. "And what they should not do is engage in a public-relations campaign of slamming the commission, which has unfortunately happened in a few cases."

When Apple's Cook visited Vestager in her office in January 2016, she was at her steely best, one witness to the meeting says.

"I think Mr Cook was more in a lecturing mode, and somehow they didn't really connect terribly well."

Apple declined to comment for this story.

Vestager says the Apple case is, in its principles, no different from any other state aid investigation. Her declaration of Apple's US$14b-plus-interest tax bill flared brightly, she says, "because it's a big number, and because it's a company that everyone knows".

No state aid ruling has ever resulted in a recovery so enormous. In a March 2016 letter to Vestager, Cook wrote that he was concerned "about the fairness of these proceedings"; when the decision was announced, Apple and Ireland promptly appealed it. The money will be placed in escrow until European courts deliver a final decision, a process that's likely to take years.

In the meantime, there will be other cases, other rulings. DG Comp is determining if Bayer AG's US$66b purchase of Monsanto will make the EU's agrochemical market anticompetitive. Vestager is also readying her decision on Luxembourg's tax relationship with McDonald's, which could be ready before the European Commission breaks for the summer in August. Her investigation may already have forced McDonald's to react; in December, the company announced it will shift its tax base to the UK.

Obligation to be an optimistHowever insistent Vestager might be that her job involves a pure application of the law, it's also inarguably informed by politics. It is, for example, a political virtue to demonstrate to eurosceptics -- as she does -- Brussels's supervision of its member states and its resolve to protect the welfare of Europe's citizens.

"In general, there is a different sort of awareness and a legislative momentum on tax cases," she says, attributing this attentiveness to the financial crisis and the tax revelations contained in the Luxembourg Leaks and Panama Papers episodes.

"People have felt that benefits were cut in some member states, public salaries were cut maybe 10 to 15 per cent -- very hard-core decisions to get in control of your spending. And then, when people see that not all businesses contribute, I think the frustration and the anger about this have been largely underestimated."

In the choppy new world order, if the US abandons its post at the tiller and retreats into itself, Vestager says, "Europe can step forward to fill whatever vacuum might appear."

There is no room for worry, no time to fret. "I think it's more an obligation to be an optimist. Pessimism will never get anything done."

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