There is a common assumption in some circles that Europe is a regulatory nightmare for business. Resentment toward Brussels bureaucrats was a prime motivating factor for Brexit, and today U.S. high tech firms complain about being pressured over antitrust and data protection issues. Claims about regulatory overreach are part of the MAGA distaste for all things European.
A report I just published with my colleagues at Good Jobs First challenges this depiction of EU practices. Entitled Europe’s Biggest Corporate Lawbreakers at Home and Abroad, the report draws on data collected for Violation Tracker Global to show that in many ways EU regulatory enforcement lags behind other countries, especially the United States.
We found that large multinational corporations based in the European Union have been paying far more in regulatory penalties outside the EU than inside. Since the beginning of 2010, EU companies have paid the equivalent of US$43 billion (about EUR 37 billion) in fines and settlements in cases brought by the European Commission and member-state regulators. This is less than half of the US$104 billion (EUR 91 billion) those companies paid in the rest of the world.
Among the 445 EU corporations included in the analysis, the average company paid $95 million in total penalties for cases brought in the EU, far less than the average of $234 million per company for cases brought elsewhere. Volkswagen, the European company with the most worldwide penalties, paid only $5.7 billion of its $30.3 billion total in the EU.
When the penalties of the EU-based parent companies are looked at by industry, the largest total by far comes from the financial services sector. Of the $58 billion in penalties paid by EU-based financial services corporations worldwide, only 12% involved cases brought by regulators in the EU. Deutsche Bank, the most penalized European bank paid only $1.1 billion of its $16.7 billion total in the EU.
When the penalties of the EU parents are analyzed according to the category of the offense, financial offenses are at the top, with a total of $50 billion. Only 11% of this amount came from cases in the EU.
By contrast, 63% of the $47 billion the companies paid in penalties for competition-related offenses came from cases brought either by the European Commission’s Directorate-General for Competition or authorities in member states. European regulators also account for most of the penalties paid by EU companies for data protection offenses.
The United States accounts for two-thirds of the total penalties paid by companies headquartered in the EU. Six of the 10 most penalized EU companies in the U.S.—including Allianz, BNP Paribas, and Deutsche Bank–have paid over 90% of their total fines and settlements to U.S. regulators and prosecutors.
In short, there are two faces of EU regulation: In the areas of competition and privacy there is aggressive enforcement with numerous high-profile cases against large corporations with substantial penalties. In other categories, there are far fewer major cases. As a result, large EU-based corporations are facing much lighter overall penalties closer to home than they face abroad, especially in the United States.
This reality is largely being ignored by EU policymakers, increasing numbers of whom are being swayed by the anti-regulatory zealots. Last year, the EU adopted the Corporate Sustainability Due Diligence Directive, which established more rigorous disclosure requirements about human rights and environmental practices in corporate operations and supply chains.
This year, the EU is backtracking. It adopted an Omnibus package that weakens the reporting rules and limits the number of companies that need to comply. Our report argues that this reversal is a mistake and argues in favor of more robust disclosure and enforcement.