Tuesday, 29 June 2010

MEPs ring alarm bells over financial industry’s excessive lobbying power

Twenty two Members of the European Parliament from across the political spectrum launched a remarkable warning against the financial industry’s intensive lobbying efforts last week, warning that it “poses a danger to democracy”.

The MEPs, all actively involved in decision-making on financial market regulation, “can see every day the pressure exerted by the financial and banking industry”. They highlighted the weakness of a counter-lobby defending the public interest and warned that there was a dangerous imbalance between the power of the banking lobbyists compared to that of civil society. The parliamentarians (including Greens, Conservatives, Liberals, Social Democrats and United Left) also pointed to the “close proximity between political and financial elites”, which “contributes to a unilateral attention to the argumentations of the financial industry” both in the US and Europe.

The appeal has attracted widespread media attention, particularly in Germany, France and Austria, with headlines like “Cry for help against finance lobby”, “The EU a marionette of the banks?”, “Helpless against the financial lobby”... It is perhaps the first time since the start of the financial crisis that the problematic role of the banking lobbies has received critical media attention on this scale in Europe.

This attention is well deserved from Corporate Europe Observatory’s perspective. Our research over the last two years has shown the influence of the financial lobby in creating the flawed EU regulatory system for financial markets, and its manoeuvres to pull out the teeth from proposals designed to strengthen regulation. They set the agenda, while politicians and the public are often sidelined.

But while the MEPs’ statement speaks out powerfully against the massive pressure from financial industry lobbyists, the solution presented is rather limited. The MEPs “call on civil society to organize to create one (or more) non-governmental organization(s) capable of developing a counter-expertise on activities carried out on financial markets”. This is not a bad idea and the MEPs are right that there is a lack of civil society expertise and lobbying capacity in this field. But the problem of the excessive influence of finance lobbyists will not be solved just by setting up a “Greenpeace of finance”.

A comprehensive action plan for breaking the undue influence of the financial sector is what is needed. This should include ending the widespread secrecy around financial industry lobbying, rolling back the privileged access currently enjoyed by these lobbyists, closing the revolving door between Commission and banking lobbies, stricter conflicts of interest rules both at the Commission and Parliament, a broader democratisation of EU decision-making (away from the current centralised and technocratic processes) and a re-orientation of the banking sector to serve society’s needs, not the other way around.

One of the 22 MEPs, Sven Giegold, has highlighted one of the most crucial problems in several interviews in German media: the continued dominance of financial industry lobbyists in the European Commission’s advisory groups (the so-called expert groups). The Commission handpicks banking lobbyists to fill up the seats in these powerful groups advising on draft regulations for the financial sector and as a result plays a key role in boosting the power of financial lobbies. It is high time for the Commission to establish safeguards against regulatory capture by industry lobbyists, starting with its advisory groups on financial markets.

Similar problems exist in the European Parliament, where numerous MEPs are far too close to the financial industry and its demands. When Parliament voted on regulating hedge funds and private equity in April, more than half of the amendments on the directive were written by industry lobbies and passed on by MEPs close to the industry. Numerous MEPs are active members of the European Parliamentary Financial Services Forum (EPFSF), a lobbying vehicle of the banking industry.

These examples underline the need for a change in political culture and vision, away from the pre-crisis thinking that what is good for mega-banks is good for society at large. The financial crisis and the continued instability have shown that the banking sector should be regulated with a completely different set of criteria, based on what kind of banking and financial services contributes to the needs of society. Both Commission officials and MEPs must break off their close relationships with Goldman Sachs, Deutche Bank, BNP Paribas and the other financial giants who have enjoyed privileged access for far too long.

One German newspaper commentator correctly pointed out that regulating financial markets is not just a matter of more balanced expertise. Only the investment bankers themselves have detailed expertise on the complex financial products they have developed in the last decade, which means in effect that these speculative instruments could be labelled as “technologies with uncontrollable risks”. As the commentator rightly points out, such risky speculative instruments (eg. the very complicated derivatives that made the US real estate market implode in 2007-2008),, should be treated in the same way as other high-risk technologies, such as nuclear power which is banned in many countries. In the end the unequal battle with the banking lobbyists can only be won if their ‘expertise’ is made superfluous, through simplified and highly transparent financial markets in which high-risk speculative activities are banned.


Wednesday, 23 June 2010

High time for CIAA to come clean on its lobbying

CIAA's €1-billion campaign to promote the GDA labelling system was clearly a key element in its political strategy to combat other, stricter labelling options which it feared would damage sales of unhealthy food, such as the 'traffic light' system. The €1-billion figure was quoted as CIAA's own estimates in an European Voice article about EU food labelling regulation. The bottom line is CIAA would have never invested a single penny into a GDA scheme if the Commission in 2006 had not decided to review the food labelling regulation.

CIAA seems to be very nervous about being referred to as a lobby group. Last week, CIAA's head of communication Lisa McCooey called CEO's offices to angrily complain about our report on the food labelling lobby battle. During this phone call, she claimed that "CIAA is not a lobby organisation". This is a remarkable statement. From its own website it is obvious that CIAA is a lobby organisation; its newsletters provide ample details of CIAA's lobbying of Commission staff, Member States representatives and MEPs, not least on the issue of food labelling.

She also claimed "CIAA has never worked with Fleishman Hillard", the Brussels-based lobby consultancy. Just a few months ago, Fleishman Hillard organised a 'Bite Size Lunch Debate' on food labelling in the Brussels Renaissance Hotel on behalf of CIAA, including a high level speaker from DG SANCO. It is high time that CIAA comes out of the closet, and registers in the Commission's lobby transparency register, which it has boycotted for the last two years.

This comment has been sent to EurActiv.com on 22 June following the publication of the article "Food industry wins battle on 'traffic light' labels".


Monday, 21 June 2010

Lobby register turns two - is there hope for transparency?

A few days from now it will be two years since the European Commission launched its voluntary lobby register. The critique of the shortcomings of the register will be well known to readers of this blog. Only a minority of Brussels-based lobbies are registered and the data of those who have joined are often unreliable (some over-estimate their lobby spending, most under-report). The register fails to show who is lobbying, on whose behalf, on which issues and with which budgets.
Take the example of the European Parliament's vote on food labeling last week, which was preceded by an avalanche of corporate lobbying. The biggest player in this lobbying offensive, food industry lobby umbrella CIAA, is nowhere to be found in the register, simply because they have chosen not to register. The voluntary register does nothing to throw light on the lobbying around this important matter.

But more interesting than listing yet more examples of the obvious failure of the voluntary register is perhaps the question whether there is any hope of progress. And yes, there is some light at the end of the tunnel. Commissioner Sefcovic and a delegation of four MEPs last month started talks about a new joint Commission-Parliament register. There seems to be consensus that this new transparency register will be directly connected with the Parliament's access pass system. The access passes are popular, if not indispensable, among Brussels-based lobbyists as they allow permanent entry to the Parliament's buildings. Linking the passes to registration could therefore drastically increase the share of Brussels lobbies that commit to lobby transparency.

It is however too early celebrate. The history of the Commission's register shows a pattern of giving in to lobbying pressure for exemptions and other loopholes. Corporate lobbyists' club SEAP is lobbying against transparency becoming a condition for Parliament access passes. SEAP claims transparency conditions would be unfair for those who are not registered. Lobby consultancies' coalition EPACA has been quiet for a very long time in the debate about the shape of the lobby transparency register, but may also be active behind the scenes.

But even in the best case scenario that Commission and MEPs stand firm on this point, the register suffers from other serious shortcomings that need to be solved if it is to be of any real value. The disclosure requirements are full of loopholes, especially when it comes to lobby expenditure information, and the Commission seems unwilling to go beyond the minor changes it announced in October 2009. The creation of the new joint register is expected to take another year.


Monday, 14 June 2010

‘Hard-core’ lobbying: “voting recommendations” sent to MEPs on food labelling regulation

Corporate Europe Observatory (CEO) has collected more than twenty e-mails from industry lobbyists with “voting recommendations” for MEPs ahead of the ENVI committee vote, in March 2010, on the ‘Sommer report’ about the new EU regulation on food labelling.

These are just a very small, non-representative fraction of the lobby messages that have bombarded MEPs during the €1-billion campaign by the food and drink industry to block ‘traffic-light’ labelling.

According to Kartika Liotard MEP, industry sent more than 100 e-mails for every one sent by civil society.

CEO is publishing these documents because we think they should be in the public domain, to allow EU citizens and journalists to understand who is influencing EU legislation on this issue.

Read the e-mails


Friday, 11 June 2010

MEP Carl Schlyter: “Industry lobbying has buried ‘traffic-light’ labelling”

MEP Carl Schlyter, member of the Committee on Environment, Public Health and Food Safety (ENVI) is shadow rapporteur on the food labelling dossier for the Greens. In this interview with Corporate Europe Observatory, he reflects on one of the biggest lobbying battles in Brussels in recent years on food labelling regulation. CEO has today launched a new report on this topic. Consumer groups demand ‘traffic-light’ labels for food packaging, which have a clear green symbol for healthy options and a red symbol for sugary, fatty and salty foods. The Confederation of Food and Drink Industries of the EU (CIAA) — on the other hand — wants the nutritional information on the packaging to be limited to single-coloured guideline daily amounts (GDAs) — which do not give an explicit, at-a-glance warning that a product is high in fat or sugar.

What was the role of industry lobbying on the food labelling dossier?
On numerous occasions during the meetings of the shadow rapporteurs of the ENVI committee, colleagues have flashed position papers from industry where they want us to consider special exemptions for gift-wrapping, for different manufacturers of different products. The arguments given to us by industry were constantly repeated both in internal negotiation meetings but also in the ENVI committee discussions. It really had a big impact on the decisions. For example, a special exemption for gift-wrapping was not an issue at all until we got a lobby letter from the food industry and suddenly it was an issue. Same thing with tax-free goods: manufacturers have been exempted from using the language of the place where goods are sold. These measures have been adopted by the ENVI committee under industry pressure.

Do you think all these measures will be confirmed in the June plenary?
Yes. When people want to change a position from the ENVI vote, they focus on the biggest issues. These are not examples of the biggest issues. The biggest issue is why MEPs are so much against any kind of warning labels from high fat, high salt, high sugar. For instance, a traffic-light system or any system warning consumers that a product has an unusually high level of sugar, salt or unhealthy ingredients was almost all voted down. And that was because of industry pressure, because in the earlier discussions MEPs were much more open-minded. But they have been exposed to so much industry pressure that it shifted focus.

In March, the so-called ‘traffic-light’ labelling system was rejected by the ENVI committee by 32 to 30 votes. Do you think it has a chance to pass in the plenary?
No, I think it would change to the worst direction, because the ENVI Committee is normally more progressive than the plenary. There are some MEPs who are not in the ENVI committee who have links with industry and industry tells them that this or that is bad, and they break the group’s lines to follow industry. So I’m not very optimistic.

How many e-mails do you receive daily on this issue?
I don’t know. But on average, every week I receive around 230 lobby e-mails, mainly from industry. As I am shadow rapporteur on the food labelling dossier, industry lobbyists have been always following me and trying to influence me.

What is exactly a shadow rapporteur and why are they targeted by lobbyists?
Every time a dossier is to be voted there is a rapporteur who writes the proposals — in this case it is Madame Sommer. This person has a huge influence on the dossier because he or she takes the Commission proposal and then he or she makes a lot of suggestions on what to change, and then all other parliamentarians react to the rapporteur’s changes to the Commission proposal. So it means the direction the rapporteur is taking has a huge impact on how people think about the dossier. And then each political group appoints one person who is following the issue for that group. And those are called ‘shadow rapporteurs’ and they are also very important because when the dossier is negotiated with the Council, after the vote in the European Parliament, shadow rapporteurs are the people involved in the negotiating process. And before the vote, if compromises are to be made, these are the people doing the compromises. So shadow rapporteurs are the ones mainly influencing the whole dossier. So they are the most important people to influence if you want to change parliament’s positions.

What is the ratio between industry lobbyists and public interest groups on the food labelling dossier?
In general it’s about 84% industry and 16% public interest. But on the food labelling issue I would say 90-95% industry and the rest is consumers. In the 90-95%, many of the exemptions and special rules in the food labelling dossier concern small or micro enterprises. However if you check the lobbyists and where they come from, it’s mainly large corporations. The most active interest groups on the lobbying front were associations of retailers, of producers of processed products such as cereals, chewing gums, ready-meals, and soft-drinks manufacturers of course. But some companies like Coca-Cola came with their in-house lobbyists. Most retail chains have their own labelling system already in place, and most have told us how excellent they are.

You’ve been shadow rapporteur 45 times during your last mandate. Is the lobbying on the food labelling dossier particularly intense?
It’s an important and big dossier and therefore there was a lot of lobbying. For instance I was shadow for REACH and then it was the same amount of lobbyists as for REACH, maybe even actually more on REACH. But this would qualify among the top-three of all the dossiers I’ve been responsible for.

What’s the problem with this lobbying?
The problem with lobbying is that it sets people’s mindsets to solve problem that are industry-related and not consumer-related, whereas the whole package is regarding food information to consumers. If you want to find an alternative position to industry’s position then you must yourself dig out the facts. So that means that in order to get a balanced picture you must put time and effort in it. I can say one thing about how I deal with lobbyists: every time I meet a lobbyist, I try to find somebody representing a different viewpoint, to counterbalance. But if I want to counterbalance industry’s interests I need to find these people myself. I need to turn to research institutions sometimes. One of my demands is that every time a lobbyists sends me a letter or contacts me to influence the legislative process, then he would have to send a copy to a public register where everybody could search and look for who influences decisions. Because then you could see the origins of proposals. We paid a researcher three months to study the chemical legislation REACH and F-gases — the legislation on other climate gases than carbon dioxide — and we asked her to check what was the origin of amendments tabled by different groups. On the F-gases dossier, between 96% and 100% of all amendments — when you can trace the origin of the amendments from the three biggest political groups — were all from lobbyists. On REACH, it was between 50% and 75%. So this shows the enormous impact of lobbying. This is a real democratic problem because there is such an imbalance in the power of influence. If we increase transparency, then we would have a better chance to deal with this democratic problem.

“A red light for consumer information – The food industry’s €1-billion campaign to block health warnings on food”, the new report by Corporate Europe Observatory is available here.