Margrethe Vestager had a rough patch in court. But Europe is far from ready to let its top digital enforcer go down in flames.
In a landmark decision, the EU’s General Court on Tuesday shot down one of the Danish politician’s most high-profile cases — charges against Starbucks that it had evaded up to €30 million in unpaid taxes in the Netherlands.
While the judges sided with Vestager in a similar case involving Italian carmaker Fiat, they found that the European Commission had not provided sufficient evidence to prove that Starbucks had fallen afoul of European rules against state aid via preferential tax treatments.
The Starbucks move carried plenty of sting. It hinted at potential trouble for the Commission in a similar decision over whether to uphold the competition commissioner’s €13 billion tax ruling against Apple and the Irish government that is expected next year.
The Apple appeal, if it goes against Vestager, could bring a major part of her legacy crashing down, damaging her reputation and raising questions about whether she’s the right person to lead Europe’s digital industrial strategy during the incoming Commission.
But for now, at least, Vestager’s problems are procedural, rather than political.
Despite Tuesday’s Starbucks tax setback, the Danish politician retains her aura in Europe — and elsewhere — as the politician who went up against American juggernauts from Google to Facebook and brought them to heel with a combination of monster fines and a take-no-prisoners attitude.
The competition commissioner remains immensely popular, with a profile that overshadows all other members of the incoming European Commission, including its president, former German Defense Minister Ursula von der Leyen.
This week’s ruling in Luxembourg, which undoes one of her landmark cases, is unlikely to change that dynamic, especially as Vestager prepares to step into what is arguably the most powerful role of her career: the European Commission’s executive vice president for digital.
In that role, Vestager will not only retain authority over antitrust enforcement, but also will be in charge of defining how technologies like artificial intelligence should be governed and how the bloc could potentially block foreign acquisitions in strategic sectors, particularly related to Europe’s tech sector.
It’s Vestager’s next big job that will garner the attention of European lawmakers in coming weeks — not her success rate at the EU General Court. A confirmation hearing in European Parliament on October 8 should offer a sense of Vestager’s status in the eyes of EU peers. Expect softball questions — not takedowns.
Reacting to the Starbucks news on Tuesday, the Danish politician showed little sign of being cowed, for good reason: While they rejected her case on Starbucks, they upheld the basic principle underlying that case and found in her favor on Fiat, offering hope that her approach to multinationals’ tax arrangements remains broadly valid.
“Today’s judgments give important guidance on the application of EU state aid rules in the area of taxation,” she said in a statement. “The Commission will continue to look at aggressive tax planning measures under EU State aid rules.”
Vestager’s smooth ride in public opinion is likely to continue until the new Commission takes office in November.
But in the ensuing months, a series of traps threaten to snare some of Vestager’s biggest achievements from her previous mandate, from a possible reversal of the Apple case to a series of appeals against the combined €8 billion in antitrust fines she has inflicted on Google in three investigations.
If her legacy starts to come undone, Vestager’s influence will wane where she needs it most — in the hallways of the European Commission and in national capitals, convincing other ambitious regulators to follow her lead in joining the dots between disparate strands of tech regulation that range from antitrust enforcement to data protection.
That, in turn, could threaten the stated ambition of the incoming geopolitical Commission, which is to elevate the European Union’s so-called digital sovereignty — or its ability to impose its own rules on the internet economy and promote new European tech champions.
To stay ahead, the Danish politician may have to abandon previous heavy-handed tactics and come up with new legislative ways of reining in Big Tech, often in conjunction with politicians who may not see eye to eye with her tactics.
After Tuesday’s Starbucks tax setback, Vestager is under more pressure than ever to deliver.
Don’t expect that to ease when she starts work in November.
UPDATE: This story was updated to add information on the Fiat ruling.
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