Flawed methodology and assumptions behind claim that business is losing Brussels lobby wars

Spare a thought for big business lobbyists in Brussels. According to a blog on the website of the London School of Economics, they are supposedly “less successful than citizen groups at lobbying EU legislators”. If only. The authors of the blog (academics Andreas Dür, Patrick Bernhagen and David Marshall) make this claim off the back of their analysis of 70 European Commission proposals introduced between 2008 and 2010, which they say show business actors to be less able to achieve their desired outcomes in EU legislative decisions. Let’s examine the main assumptions, methodology, and findings from the blog to try to explain how they could have gotten Brussels’ lobbying power picture so wrong.

Essentially, the blog’s conclusions can be explained by the questionable methodology that was used to determine lobby ‘success’. On the basis of interviews with 95 Commission staff (see page 13 of the longer underlying research article), the researchers determined a long term lobby objective for business groups and citizens groups, as well as “initial” European Commission and European Parliament positions on a scale of 0 - 100. To use computer geek slang, this seems like a case of GIGO (garbage in garbage out): “if you input the wrong data, the results will also be wrong.” The figures that the researchers used to make their elaborate calculations of lobbying success are just a numerical expression of value judgements of a group of officials who had particular responsibilities for the relevant legislative proposal. Not exactly a neutral, unbiased group! On top of this, the scale of 0 - 100 to measure lobby positions and outcomes is insufficient. Many legislative proposals have hundreds of amendments and there can be wins and losses on different elements of a proposal. Real assessments of success cannot be so one-dimensional.

In the examples highlighted by the researchers it also becomes clear that questionable assumptions have been made which lead to problematic conclusions. They say that “the contemporary European legislative agenda tends to be dominated by proposals aimed at protecting consumers or the environment”, with their premise being that business opposes any change to the “low regulation status quo” and that any other outcome is a defeat for business. But that is overly simplistic. If there is political consensus that a type of pollution or a toxic financial product needs to be dealt with, regulation becomes unavoidable. Business strategy is then more likely to aim for weaker and delayed regulation than to oppose regulation altogether.

On the issue of CO2 emissions reductions for passenger cars, for example, the car industry’s aim is defined as “no binding CO2 emission reduction target” and the outcome is described as a draw. This is a problematic simplification of this lobby battle. After industry lobbyists had secured a deal with merely voluntary targets in the 1990s, it became clear in the mid-2000s that producers wouldn’t meet those targets in time. During a 2006-2008 lobby effort the car industry managed to once again water-down and postpone long-overdue binding CO2 reductions for cars. This can only be described as a victory for industry.

In their blog, Dür, Bernhagen & Marshall use the case of data protection legislation to back up the claim that business doesn’t get its way. In fact in this case, digital giants like Amazon and eBay were well on the way to a victory when the lobbyplag.eu website exposed their aggressive lobbying strategies to weaken protection of personal data online. The website exposed that hundreds of amendments proposed by MEPs were found to have been lifted word-for-word from corporate lobby papers. This caused a massive public outcry and stiffened the resolve among a majority of MEPs to not give into big business lobbying pressure. The data protection directive is a rare example where corporate lobbying backfired and led to a better outcome for the public interest.

It is not clear which other legislative battles have been analysed, but the sample of directves that Dür, Bernhagen and Marshall used for their research also included new banking legislation introduced in the response to the 2008 financial crisis. Have banking lobbyists been “less successful than citizen groups at lobbying EU legislators”? At CEO we have reported on financial market legislation since the beginning of the crisis and we have come to the conclusion that new rules have fallen well short as a result of a massive anti-regulation campaign by the banking industry. In our report The Firepower of the Financial Lobby, we revealed the scale of lobbying on financial regulation, documenting how the financial lobby in Brussels commands an army of at least 1700 lobbyists. Statistics in the report illustrate the disproportionate number of meetings between financial lobbyists and civil servants from the Commission’s Internal Market and Services Directorate General (DG MARKT). 433 meetings over the 12 months between early 2013 and mid 2014. Major issues being debated in Brussels during this period included rules for hedge funds, food speculation derivatives, banking separation, and the banking union.

There are between 15,000 and 25,000 lobbyists in Brussels, overwhelmingly representing the wealthy corporate world. It’s not a transparent sector so this is an educated guess. Detailed sectoral analysis shows the dominance of big business in the influence game. For instance, we recently found that pharmaceutical trade associations had over 50 meetings with the Juncker Commission in its first four-and-a-half months of office. This is perhaps not surprising when you consider their relative spending power. Big Pharma spends €40 million yearly on EU lobbying, 15 times more than civil society actors working on public health or access to medicines.

So, how do successful corporate lobbyists carry out their work? There are three stages of influence that correspond to the three European institutions for those seeking to effect EU legislation. First comes agenda-setting, primarily targeting the Commission. Across all policy areas, NGOs estimate that three-quarters of high-level meetings between lobbyists and the Commission are with the private-sector. Only 18% are with public interest groups. These statistics and our body of research points to an effective industry capacity to define priorities and obtain crucial influence before the outer wheels start turning on the EU policy process.

Taking the proposed trade secrets directive as an example (which civil society is worried will protect companies’ so-called trade secrets in a way which will endanger the work of journalists, whistle-blowers, unionists and researchers), from the very beginning of the process on this dossier, the Commission took a strong interest in adopting industry’s recommended approach. In fact, it outsourced research to law firms with a structural interest in the development of new legal protection tools for their corporate clients. This dossier also illustrates the shortcomings of the assumption made by the authors that business actors merely defend a “low regulation status quo”. In this case, stricter regulations protecting corporate ‘trade secrets’ with wide definitions and weak exceptions are exactly what industry seeks to further limit corporate accountability and the transparency of corporate data.

The second stage of influence targets the European Parliament. In the lobby battle over food labelling in 2010, we collected emails from industry lobbyists with voting recommendations for MEPs ahead of an environment committee vote on the ‘Sommer report’ about the new EU regulation. The food industry lobby campaign turned very aggressive and ultimately played a vital role in blocking the proposed traffic-light food labelling system which would have helped consumers to more easily identify healthier foods.

The third and final stage in the process concerns the European Council and the member states. The national ‘permanent representations’ can offer a really useful opportunity to overturn any provisions introduced by ‘hostile’ MEPs to a draft law. And more and more often, industry lobbyists will prioritise work in member state capitals, knowing full well that national governments have an opportunity to oppose, and sometimes veto, anything that they do not like. In the aftermath of the car emissions defeat for environmental and consumer NGOs, which led to a weakening of proposed emissions limits, many spoke of the prominence of Chancellor Angela Merkel’s intervention into the debate on the side of the German car manufacturers. As Deutsche Welle phrased it at the time: German Car Lobby Appears to Bend Will of EU Regulators

In their blog, Dür, Bernhagen & Marshall speak of business interests’ “lack of natural allies in contemporary EU decision-making”. But our work has shown how lobbyists have very close ties to key Commission departments, such DG Trade, DG Grow, DG FISMA, etc. Take the example of the EU-US Transatlantic Trade and Investment Partnership (TTIP). DG Trade is leading on the talks for the Commission and prepared the negotiations in a disastrously unbalanced manner, actively inviting business lobbyists to contribute their views and priorities while ignoring other interests. Meeting statistics show that a whopping 88% of the Commission’s meetings with stakeholders during the preparation phase of the negotiations in 2012 and 2013 were with big business.

Indeed, as officials from both sides acknowledge, the main goal of TTIP is to remove regulatory ‘barriers’ which restrict the potential profits to be made by transnational corporations on both sides of the Atlantic. This is to happen for instance through the so-called ‘regulatory cooperation council’ which would oversee, from a ‘free-trade’ perspective, the development and implementation of the vast majority of laws to do with public health, consumers, workers, and the environment in both the EU and US. Industry lobbyists propose regulators use sweeping tools for regulatory cooperation such as “mutual recognition,” which could erase important differences between US and EU laws, and impede the development of better regulation in the future – not a win for civil society groups! Indeed, following complaints from business groups that talks are moving too slowly, U.S. and EU negotiators have agreed to speed things up. Trade Commissioner Malmström said “We will instruct our negotiators to exercise creativity and flexibility in order to achieve progress in all areas.” This corporate finger snapping attitude has been heeded and acted upon by the Commission despite the fact that close to three million EU citizens have registered their opposition to the possible deal.

Brussels is home to one of the highest concentrations of political power in the world and a corporate lobbyist has many tools to draw upon. Industry is outnumbering and outspending NGOs on EU lobbying. Business access to key decision-makers is boosted through revolving door cases involving MEPs and Commissioners as well as the skewed composition of expert groups advising the Commission. The demands of big business are not just heard loud and clear, but in many instances also acted upon by EU decision-makers. Business groups far too often manage to set the EU agenda, while public interest groups essentially find themselves doing damage control in the aftermath. This is not to say that citizens groups have no impact. They sometimes, with great effort, manage to win real victories by increasing awareness and mobilising the public. However, in many battles, they are defeated by a toxic mix of money, access, and dominant ideology among EU decision-makers. The Dür, Bernhagen and Marshall study may be accurate on its own terms, but it does not provide the real picture of who wins Brussels’ lobby battles.

Comments

Rejoinder
Andreas Duer

We are delighted that CEO is interested in our work. Unfortunately, the interpretation of our article by CEO has a number of major flaws:

To begin with, the statement that our figures “are just a numerical expression of value judgements of a group of officials” is incorrect for two reasons: Firstly, while Commission officials in some DGs may be close to business groups, staff in others liaises more closely with NGOs. As we use data across all these DGs, a bias toward business is unlikely. Secondly, as we explained extensively in our article, our data do not simply rely on interviews with Commission officials. Rather, we cross-checked the officials’ statements with consultation documents submitted by lobbyists – business and civil society.

Next, we agree with CEO that “there can be wins and losses on different elements of a proposal”. However, this supports rather than undermines our methodology: Our unit of analysis is not the lobbying activity of an actor on a proposal, but the lobbying activity of an actor on conflictive issues within proposals. We stress this throughout our paper.

Third, we agree that the fallback option for business is frequently “to aim for weaker and delayed regulation [rather] than to oppose regulation altogether”. As Figure 3 in our article shows (and as we discuss in the text), the business position does indeed not always coincide with the status quo. However, it is quite close to the status quo on average, and more so than the position of other groups. For all the lobbyists in our data, business or not, we measured their preference to be what they wanted and not what they eventually came to accept as a more realistic goal (in which case any actor would indeed appear victorious more often simply by lowering their ambitions).

Fourth, CEO claim that “[i]t is not clear which other legislative battles have been analyzed”. We find this surprising, as the full list of proposals that we analyzed is reported in an online appendix (available here: https://goo.gl/f222NE and here: http://cps.sagepub.com/supplemental), which we state clearly in the paper.

Fifth, CEO argues that with respect to banking regulation, “new rules have fallen well short as a result of a massive anti-regulation campaign by the banking industry.” This may well be, but this statement relies on a necessarily questionable assessment of the “optimal level of regulation”. What we observe in the banking and other areas is that business prefers a low level of regulation, whereas citizen groups prefer a high level of regulation. In the end, on average we get a relatively high level of regulation, which does not fully satisfy citizen groups, but leaves business even more aggrieved. Such a comparison of the relative utility gains of different actors allows for a measure of success that is intersubjective, whereas a measure involving an optimal level of regulation is not.

Sixth, we do not in any way dispute CEOs observation that “the financial lobby in Brussels commands an army of at least 1700 lobbyists”, or the many other references to the resources and access to decision-makers commanded by business. In fact, our sample of interest groups clearly shows that business actors find it much easier to mobilize. In related work, we also show that business actors indeed enjoy better access to decision-makers in the EU than other interests. But there is a difference between inputs to the lobbying process and outputs. We may even see business interests mobilizing so much exactly because they feel that they are on the defensive. Resources may be a predictor of success or influence; but they should not be equated with the latter.

Seventh, CEO’s point that “industry lobbyists will prioritize work in member state capitals” is fully consistent with our analysis. Again referring to Figure 3 in our paper, we see that the average position of the Council of Ministers is quite close to the average position of business. But recent changes in the legal basis of EU decision-making have shifted power away from the Council to the European Parliament. This shift, as we discuss in our paper, goes to the detriment of business interests.

Finally, concerning TTIP as an example of business success: We explicitly mention in the paper that trade policy is an area in which we see (some) business interests and the Commission being natural allies. It is for this reason that we expect business success in this policy field (see note 7 in the paper).

Two more general points:
First, we do not argue that business is never successful in the EU. Two of the three hypotheses we formulate are about when business interests win (when the European Parliament plays a subordinate role in decision-making and when conflict is low). More generally, the major strength of our approach is that we start from a large, random sample of issues, rather than relying on anecdotal evidence on individual cases of business success or defeat. This leads us to report that, in recent years, business has on average been less successful than citizen groups in playing the Brussels game. CEO mentions a small number of cases in which business has more or less successfully influenced policy and claims that these are representative of how policy is normally shaped in the EU. Referring to the data protection case in which citizen groups were able to secure “a better outcome for the public interest”, CEO dismisses this as a “rare victory”. But unless a systematic scientific approach like ours is used, it is impossible to tell how typical the former or how typical the latter case really is.

Second, we read our results as showing that the efforts by various citizen groups advocating for legislative outcomes regulating business are relatively successful. CEO might want to think about our results as an indication that advocacy by non-business groups is not futile, rather than questioning the need for citizen group advocacy in the EU.

Andreas Duer, Patrick Bernhagen and David Marshall