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EC official on Paks, Uber and a level playing field

European Commissioner for Competition Margrethe Vestager gives an exclusive interview to the Budapest Business Journal covering a range of issues that her office is investigating or monitoring in Hungary.

European Commissioner for Competition Margrethe Vestager. (Photo: Trine Sondergaard)

European Commissioner for Competition Margrethe Vestager is in charge of fighting unfair monopolies and ensuring a level playing field for businesses in the European Union.

Her office is now investigating the fairness of the Paks II project, a €12 billion upgrade to Hungary’s sole nuclear power plant that is just beginning. Because analysts say building two new reactors at the plant might not produce electricity at a competitive market rate, Vestager’s office is investigating whether the Hungarian government’s support for Paks II amounts to illegal state aid. Vestager spoke to the Budapest Business Journal about the challenge of ensuring competitiveness in Europe, the case against Uber and the state of the Paks II investigation.

Lately, we have seen the European Commission launch several investigations into tax deals between countries and large multinational companies. What accounts for this number of investigations and their timing? Is the Commission taking a stricter stance on these firms?

This line of work goes back all the way to Commissioner [for Competition Mario] Monti, who saw that state aid, in terms of fiscal aid and tax benefits, was also important to make sure that we have fair competition. You find decisions over the years but the work has intensified now also due to much more knowledge about selective tax advantages. These concerns led to us opening the cases of Starbucks, Fiat, Apple and Amazon – the Belgian scheme we have taken decisions on a couple of weeks ago.

Last month the Commission approved Hungarian state aid given to Audi Hungaria to expand its factory in Győr based on the positive effect this will have on local employment and investments. How much do factors like employment matter and could this be a precedent for other ongoing cases in Hungary?

What we do is to make sure that businesses compete on a level playing field, and do not enable one member state to pour money into a business that then competes with a business in another member state that cannot support them.

Sharing economy businesses have been on the radar of regulators in the EU and member states – in part owing to tax issues. The Hungarian government’s recent regulation requires Uber drivers to comply with the same rules as taxi drivers – including tax payment. What is the EU’s current stance on the sharing economy when it comes to competition, taxes and consumer protection?

I work closely with Violeta Bulc, the commissioner for transport and Elżbieta Bieńkowska, the commissioner for the single market, in order to get a full understanding of the workings of new business models that are disruptive in their character. I think it is quite obvious that, just as we need innovation in business models, it is only fair that new businesses also have to pay their taxes, take care of their customers’ security with insurance, etc. We see that member states take initiatives that we take on board, in an effort to hold the balance between this need for innovation in business models and the legitimate demands of paying taxes and taking care of customers’ security.

Is there going to be a Europe-wide regulation to control these businesses?

This is too early to say. We haven’t finalized the work we are doing, so that is still open. Probably, we will have wider discussions with member states as it is in the interest of all countries. We won’t conclude until we have finalized our work. We look at what member states do and then we may be able to find a common approach.

In the case of Paks II, the Commission is investigating whether state aid is involved. How do you see this question at this stage?

It is still early in the investigation, therefore it is difficult for me to say anything about it. What we are looking into is if the investment in the nuclear plant is being undertaken on market terms or not. We assess the business case for the construction, operation and commissioning of the two reactors on the basis of the agreed transaction terms and in view of the EU’s energy market protection. That’s what we have done before, most recently, in the case of Hinkley Point.

In defense of Paks II, the Hungarian government often cites the Hanhikivi power plant in Finland, which they say was set up based on a similar business model, and won the approval of the European Commission.

When we open an investigation, we do so because we may have concerns and want to make sure that the project doesn’t lead to distortion of competition on the energy market or other undue distortions in the single market. But we do this with an open mind: We take on board the answers and the arguments to the questions we ask, therefore I have no in-between conclusion.

What happens if the Commission finds that state aid is involved in supporting Paks II, or the project cannot be managed on market terms?

We can have different outcomes. We can have one that it is no aid, or it can be illegal aid in general, or it can be aid that is compatible with the treaty. In a number of circumstances you can give aid – but it is too early to say, as we investigate neutrally.

The Commission opened the floor for third parties to comment on Paks II. How much weight will you give to what third parties say?

One of the good things about opening an investigation is that people know what is being said and can share their comments. For us it is important to make sure that we treat these comments in a neutral and unbiased way, basing our eventual decisions on the facts of the case. I think it is important that people can say how they see things, offer the facts they want to produce and put them on the table in a transparent democracy like the European Union.