Thierry Breton Resigns- What Does it Mean for European Tech Regulation?

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In 2019, Thierry Breton, a French business executive who became France’s Minister of Finance from 2005 to 2007, was nominated by President Emmanuel Macron to become a member of the European Commission. In that role his name and face were closely associated with Europe’s push to regulate digital markets and the passage of legislation such as the Digital Services Act and the U’s AI Act.

On Monday, September 16 - in a letter that called into question EU Commission President Ursula von der Leyen’s governance - Breton resigned his post. While certain tech executives may be happy to see him go- Elon Musk posted “bon voyage” to the news - his departure spells change for Europe’s approach to tech going forward. To learn more, I reached out to a European journalist who is covering these matters closely, and who has been kind enough to share his reporting on the EU AI Act with Tech Policy Press in the past: MLex Senior AI Correspondent Luca Bertuzzi.

What follows is a lightly edited transcript of the discussion.

Justin Hendrix:

I appreciate you joining me. You wrote that Brussels "woke up flat-footed on Monday" with Thierry Breton's resounding resignation. What happened? Why did he resign?

Luca Bertuzzi:

Where to begin? Yeah, so let's start from introducing the audience to this guy, Thierry Breton. He has been probably the most influential commissioner in the past five years. He was in charge of the digital portfolio, but he had a much wider competence, also covering defense and internal market, which is very important. So he had this sort of mercurial personality. He was all over the place. He was the sort of guy that throws ideas and then pretends to be that they are implemented right away. And he was embodying France's approach to digital regulation and to industrial policy, which is basically to say we have to stop being so dependent on US companies, on American technology. We need to cut loose strategic dependencies on stuff like chips, satellite-based communication, all critical raw materials. So basically he was the one leading this charge against big tech companies with regulation like the Digital Services Act, Digital Markets Act, the AI Act.

He didn't shy away from being confrontational with some of the most powerful businessmen in the world, be it Elon Musk or ... He didn't spare anyone from slapping their wrist and saying, "You have been a bad boy." And I think that his personality was one of the main reason why digital policy on the EU level has become the focus of attention for so many tech businesses. Before in the Silicon Valley, they used to say that you always have to keep an eye on Washington, because sooner or later what happens there will affect them as well. Now they also have Brussels on the radar. But I think that with Breton gone, that might change. So we will need to see. You asked me why he left. Basically this guy was very ambitious. He knew no limits, and formerly, he had Margrethe Vestager as his boss, the very famous chief of competition policy for the bloc.

She led a few very high profile antitrust cases against Google, against Apple, and still confronted to ... With Breton, she looked like a moderate and she was completely sidelined in terms of who was in charge of digital policy. But the problem was that Breton even went against the real boss, Ursula von der Leyen, the president of the commission. He tried to undermine her publicly, thinking that he could become the next president, even though that was very unrealistic. So eventually, I think von der Leyen realized that she needed to get rid of this loose cannon, because if she wanted to consolidate her power, and that's what she did. She exploited the fact that France is now internally very divided, because the National Parliament, there is no clear majority. Macron is very weak, and so she bargained to give France a better portfolio if they got rid of Breton, and that's what Macron accepted.

Justin Hendrix:

There are both near term and long-term consequences for tech policy, digital policy in the EU, but in the near term, what does it mean? Who's likely to replace him? And what other dominoes might fall in the foreseeable future?

Luca Bertuzzi:

This week was very eventful in Brussels. President von der Leyen revealed her new College of Commissioners, and so we will have a Finnish commissioner, Henna Virkkunen for the digital portfolio. The thing is we don't really know much about her stance toward industrial policy and confrontation with big tech, which actually I think it's an indication in itself that she will be a much milder regulator than Breton. I think the Breton's disappearance from the stage will leave an important power vacuum in the next commission. And the way von der Leyen structured the portfolio seems to be a divide and conquer strategy, because she split things up so much that no one is really in charge of anything. And she's the ultimate power broker. So I think what we are going to see is much weaker and less effective commission.

In the past five years, the EU has passed landmark legislation, what I was mentioning before, the DMA, DSA, and AI Act. These rules are there to stay. The point is that the commission has a leading role as an enforcer. And the political leadership has a huge impact on how much energetically you're enforcing these rules. So I would definitely expect that without Breton in charge, we won't see the same level of confrontation with big tech companies. We won't see attempts to ... For instance, Breton was the one proposing that localization requirements for cloud service providers, which would've made it almost impossible for US hyperscalers to sell, to operate in large parts of the EU market.

I don't think this is the sort of things we can expect from Virkkunen. I think we are going to see a much more relaxed approach to big tech. Because also, if you consider the fact she is in charge of tech and security, this is a very broad portfolio. They're not necessarily compatible taken together, because you cannot be too much confrontational with big tech companies when your security largely depends on the US. And Virkkunen is a Finnish national, so she knows that very well, being at bordering with Russia, that she'll need to cooperate with Americans rather than oppose them and slap them with fines and so on. So I think what we're going to see is a significant change of course.

Justin Hendrix:

And is there any immediate effect on the investigations that have been launched under the commission during Breton's period?

Luca Bertuzzi:

Yeah, so I think there are two levels here. One is the political level, and Breton, I would say he changed the rule of the game in terms of making the commission a sort of glamorous institution. He used investigations to shine at the global level. He sent these letters that sometimes, they were not even anywhere in the procedure. They were his personal initiative.

Justin Hendrix:

And that got him in trouble, right?

Luca Bertuzzi:

Well, it's not that it got him in trouble, but I think it contributes to the perception that he was a sort of loose cannon and that he was doing everything in his power to shine, to use tools like the DSA to hit headlines worldwide. But at the same time, I think that certain investigations will move ahead. If you take, for instance, TikTok, investigation on Meta, online child protection will be a big priority of this commission. So I don't think that much will change. Also, counterfeit goods, the commission is looking at Chinese e-commerce platforms like Temu. These are all things that directly impact people's lives [inaudible 00:09:45] thing that doesn't work or it's even dangerous for kids.

So I think the overall structure remains the same, and certain political priorities will stay. But we will see, I think, a less PR-driven decision making in how these investigations are managed, which to a good extent, it's a good thing. At the same time, we might prefer having someone that puts a face on a law, on a regulation. It's also good because it provides accountability at the end. But if this thing doesn't work, you could blame Breton. But if the next commissioner is much more low-key, no one takes responsibility, then yeah, I would say the Brussels impact in terms of digital policy might fade away.

Justin Hendrix:

You mentioned Finland and its ascendant role. I understand other parts of the portfolio that deal with tech have gone to other member states. Can you speak about that a little bit? Who else is likely to enter the stage here when it comes to tech?

Luca Bertuzzi:

Yeah, as I said, it's very complicated, the way the portfolios have been distributed. So Virkkunen is executive vice president, which means she has three commissioners below her, the commissioner for justice, Michael McGrath, which will be one to watch because the EU is about to reform his consumer law to see whether it fits the online environment. And we are expecting a Digital Fairness Act that will cover things such as influencer marketing, cookies, addictive design. This is going to be one of the most important digital laws of the next mandate.

Then she also has the Austrian commissioner for home affairs, Magnus Brunner, who will be leading all the child sexual abuse material regulation, which has been very controversial because it might tamper with encryption. She also has the defense commissioner. So I think in the commission, between the formality of the job titles and how things work out in practice, where the power balance takes shape, it's really a matter of personalities. So if you take McGrath and Brunner, they were both senior ministers in their respective governments. Why should they take orders from Virkkunen? I think it's going to be very complex, how things will work out. And yeah, I don't see Virkkunen ... At this point in time, we don't know her so well yet as such a strong personality that could leave a foot on imprinting like Breton did.

Justin Hendrix:

There's a lot more consideration in Europe as well as in many other countries in, quote, unquote, "digital sovereignty," the ability to set your own course, set your own future. Big part of the European regulatory project seems to be about saying, "We'd like to have some control over our future." Breton seemed like he was a face of that effort and seemed very influential in it. What do you make of that broader effort at the moment? Does his departure, as you say, it's a significant personality leaving, but how is that broader movement going?

Luca Bertuzzi:

This is very interesting, because indeed Breton was the main driver of that, and France behind him too. France has always seen the EU as a vehicle to garner global influence. And this whole idea of strategic autonomy was trying to position the EU as a leading world power alongside the US and China. But now, France is weak. Breton is gone. And it's not really clear who will pick up the torch of strategic autonomy. Ironically, the French narrative that we need to take things into our own ends was gaining ground, was becoming the main narrative in Brussels. Even Virkkunen's role is called for tax sovereignty. And we have seen last week, Mario Draghi, the former European Central Banker, a very influential statesman in Europe saying, laying out in a report that Europe is falling behind in terms of economic competitiveness, and it needs a very muscular industrial policy to re-enter the tech race with the US and China.

Still in this framework, who is going to push for that? It's really not clear. And also what Mario Draghi highlighted was that there is a dire need for pulling together resources. I'm talking about common debt, euro bonds, but there is no political will to go in that direction. The German center-right party that is expected to win the elections next year already said that they don't want this common debt. So all these ideas are there, and I think that Draghi provided a sort of diagnosis that it's either we try to change things, or it's a slow agony into economic decline. But I'm afraid that most of what he said will stay in the drawer and won't be implemented, because there is no strong leadership to push it forward.

Justin Hendrix:

Anything I didn't ask about you think is relevant, my listeners could know from you before we finish up today? Anything else you're looking at that is crucial coming down the path in 2025? Digital Fairness Act may be something new for some of my listeners, something to look forward to as we see how that goes through the process, whether it's as significant as the DMA and the DSA. We're going to continue to add three-letter acronyms to the regulatory toolbox. What else is there that you're looking forward to in 2025?

Luca Bertuzzi:

Digital Fairness Act is a bit of a question mark, because it could cover so many things. But there is also an internal clash between the digital policy department in the commission and the justice and consumer department on who owns certain topics like web cookies and addictive design. Of course, much will depend on the new power balance in the commission, and that will take some months to take shape and how this clash will ... yeah, how things will land. I think what we can expect in the coming year is continuous enforcement on the DMA and the DSA.

Curiously enough, von der Leyen sent a mission letter to Virkkunen about what should be her tasks, and she mentioned the DMA and the DSA. But she didn't mention the AI Act. The reason for that is also Mario Draghi criticized the AI Act, saying this is a regulation that is preventing European companies from innovating. He was also very critical of the GDPR. I think for sure in term ... How to put it? It's much easier to regulate companies that are not Europeans. And most of those covered in the DMA and DSA are not European companies, mostly American and Chinese. For the AI Act, it might be different. The commission might be more cautious. They want to see if so-called champions like Mistral, Aleph Alpha can emerge in the tech scene and continue to be important players in the long run. So I think we're going to see a much more nuanced and cautious approach on that side of enforcement.

Justin Hendrix:

Is that it for Thierry Breton? Will we hear from him at all again? Will he emerge in some other political context?

Luca Bertuzzi:

Well, for sure, he burned his bridges in Brussels. The way he resigned, accusing the president and slamming the door, his picture was taken off the wall the same day. And the guy is almost 70. He could as well retire. But the thing is, he's full of energy. So I wouldn't be surprised if he pops up in a government role in France or as a chief executive officer of some French company. We shall see, but for sure, we are not going to see him again in the commission press room or slapping Elon Musk as a regulator. I think those days are gone. And yeah, we will have the tech journalists in Brussels will have to get used to a much more boring commission going forward.

Justin Hendrix:

Well, perhaps I'll have you back on soon and we'll find out just how boring. I suspect there'll be some things that are worth talking about. Luca, thank you so much for joining me to speak about this.

Luca Bertuzzi:

Thank you, Justin, for inviting me.