The New York Times - USA (2020-07-31)

A14 Y THE NEW YORK TIMES INTERNATIONAL FRIDAY, JULY 31, 2020

TORONTO — There was no cor-
ruption, no conflict of interest, just
a government and prime minister
working around the clock to save
lives and livelihoods during a pan-
demic.
That was Justin Trudeau’s mes-
sage on Thursday to Canadians,
who for the past month have lifted
their heads from the exhausting
struggle with the coronavirus to
watch a growing political scandal
over his government’s decision to
award a hefty no-bid contract to a
charity that has ties with his fam-
ily.
“Nothing of this program was in
any way going to benefit any
members of my family,” the prime
minister said during a rare virtual
appearance before the standing fi-
nance committee of the Canadian
Parliament. “I was not in a conflict
of interest.”
The highly anticipated session,
which stretched for 90 minutes,
had elements of drama — heated
exchanges, baiting questions and
even a power outage during a
storm over the chairman’s home.
But Mr. Trudeau predictably
kept his cool, displaying his well-
honed political talents.
The contract, made to the WE
Charity, was to oversee hundreds
of millions of government dollars
for an emergency summer youth
volunteer program. Mr. Trudeau
defended the decision to give the
charity the contract by presenting
himself as a longtime champion of
youths. And he said he was follow-
ing the advice of public servants
to start a program that, like others
his government has set up, would
help thousands of people across
the country.
“We moved quickly to try to get
help out to people as fast as we
could as flexibly as we could,” Mr.
Trudeau said.
The question is: Was his per-
formance enough to persuade Ca-
nadians that he did nothing
wrong, and put to rest thorny ethi-
cal questions that have set the me-
dia ablaze for the past month and
dragged down his party’s polling
numbers?
WE Charity is tied not only to
Mr. Trudeau’s family, but also to
his finance minister, Bill Morneau.
Mr. Trudeau’s mother and
brother earned more than
$200,000 over the past five years
for speaking engagements with

the charity. Mr. Morneau’s daugh-

ter works there, and his family has

traveled overseas with the charity

twice in recent years.

Both Mr. Trudeau and Mr.

Morneau have apologized for not

recusing themselves from the

cabinet decision. Both are under

investigation by the country’s

ethics commissioner.

But during Thursday’s testi-

mony, Mr. Trudeau reinforced

what others have said before him

— that officials of Canada’s apoliti-

cal public service chose the char-

ity and that his cabinet was given

a “binary choice” of either agree-

ing to the plan, or having to aban-

don it altogether.

The perception of a conflict with

his family, he added, caused him to

put the decision on hold for two

weeks and push the public service

to “make sure that everything

was done exactly right, because I

knew there would be questions

asked because of the links of the

family.”

Lori Turnbull, director of the

school of public administration at

Dalhousie University in Halifax

was among the rapt viewers who

blocked off hours to see the un-

folding testimonies. “He got his

message out — you want the Lib-

erals to be there to take care of you

when a crisis like this hits,” she

said, referring to Mr. Trudeau’s

party. “To me, the prime minister

left this meeting as a youth cham-

pion who made a little error.”

Still, the prime minister has al-

ready been found in breach of the

country’s conflict-of-interest rules

twice since coming to office five

years ago. That he acknowledged

a perceived conflict but did not re-

cuse himself raises troubling

questions about his political judg-

ment, said Shachi Kurl, the execu-

tive director of the Angus Reid In-

stitute, a Canadian nonprofit

polling firm based in Vancouver.

“In some ways, I think he did

very well,” Ms. Kurl said. “But it

doesn’t fix other problems. Now,

we have to assess to what extent

these ongoing examples of the

prime minister not having good

judgment will become a ballot

question.”

The story has unfolded since

late June, when the Trudeau gov-

ernment announced it had

awarded the job of administering

the summer program, worth up to

912 million Canadian dollars

(about $680 million), to WE Char-

ity.

Two brothers, Craig and Marc

Kielburger, founded the charity as

teenagers. Since then, it has

grown into a network of organiza-

tions that have built schools and

wells in countries like Kenya and

Nicaragua.

But it is best known for inspir-

ing young Canadians to get in-

volved in social justice issues

through school programs and

huge concert-like events featur-

ing motivational speakers, includ-

ing Prince Harry, Malala

Yousafzai, Mr. Trudeau and his

wife, Sophie Grégoire Trudeau.

The charity says the Trudeaus

volunteered their time and were

never paid, with one exception in

2012, when Ms. Gregoire Trudeau

received about $1,000 for a speak-

ing engagement. Mr. Trudeau was

not prime minister at the time.

But it did pay Mr. Trudeau’s

brother Alexandre, a filmmaker,

and mother, Margaret, the coun-

try’s former first lady, for speak-

ing over the past four years on be-

half of the charity at various

events. The Kielburger brothers

said attracting sponsors for these

events was their main way of rais-

ing money.

On Thursday, Mr. Trudeau said

he did not have a personal rela-

tionship with the Kielburger

brothers and had no contact with

them about this contract.

In recent days, witnesses be-

fore the committee bolstered what

Mr. Trudeau said Thursday — that

he was not involved in selecting

the charity to administer the pro-

gram, which involved overseeing

up to 100,000 students volunteer-

ing for public service jobs.

WE was to have received as

much as 43.5 million Canadian

dollars to run the program, ac-

cording to documents released

this week. But after the contro-

versy erupted, the government

announced it was taking the pro-

gram back, and the Kielburgers

said they would return all the

money.

The program is still on hold.

Hours before Mr. Morneau, the

finance minister, was to testify

last week before the committee,

he announced he had written a

check to the charity for 41,366 Ca-

nadian dollars, stating that he

hadn’t realized he and his family

had not paid the full fare for the

two trips they took with the orga-

nization. He also disclosed that his

family had donated 100,000 Cana-

dian dollars to the charity in re-

cent years.

“You don’t donate 100,000 dol-

lars, take trips with a charity and

have a daughter who works there

and not know there’s a conflict of

interest,” said Duff Conacher, co-

founder of a nonprofit watchdog

organization, Democracy Watch,

which is calling for a criminal in-

vestigation.

“This is a story about how every

government has friends, those

friends help them get elected and

promote them, and then the gov-

ernment wants to help those

friends because they will promote

and boost them more,” he said.

The committee has not heard

any evidence that Mr. Trudeau

stood to financially benefit from

the contract, several political ex-

perts pointed out. If there has

been any damage, it has been in

optics.

“Technically speaking, he didn’t

need to recuse himself in my opin-

ion,” said Ian Stedman, a profes-

sor of Canadian public law and

governance at York University in

Toronto, and an expert on Canadi-

an parliamentary ethics law. He

added: “But pragmatically speak-

ing, what he did was bad politics.

He allowed himself to be the story,

instead of his policies.”

Canadians have been generally

happy with the Trudeau govern-

ment’s handling of the coro-

navirus epidemic, which has lev-

eled off across the country, allow-

ing hairdressers and restaurants

in most places to reopen and plans

for school openings to be drafted.

But in recent weeks, since news

about the charity has continually

made the front pages, Mr.

Trudeau’s approval rating has fall-

en. It is unclear whether that is a

blip or the start of a trend.

“People have concerns about

this, but they have so many other

issues right now,” said Jean-Marc

Léger, the chief executive of the

Léger polling firm based in Mont-

real. “They are worried about the

pandemic, the economic crisis, re-

lations with the United States.”

The Kielburger brothers main-

tain they would have made no

profit from the contract.

Because of the intense scrutiny

over the past few weeks, many big

sponsors have cut ties with WE —

the organization has called the de-

cisions mutual — and former staff

members have poured out stories

on social media about the chari-

ty’s “culture of fear.”

Craig Kielburger said the un-

folding controversy might “de-

stroy” the organization.

“Frankly, there are days that we

wish that we never answered the

phone,” when the government

called asking them “to help,” he

told the committee near the gru-

eling end of the brothers’ four-

hour appearance earlier this

week.

Trudeau Says Charity

With Ties to His Family

Deserved Big Contract

Prime Minister Justin Trudeau of Canada testifying on Wednesday by videoconference before a parliamentary committee.

BLAIR GABLE/REUTERS

By CATHERINE PORTER

A prime minister

insists that there was

no conflict of interest.

Dan Bilefsky contributed report-
ing from Montreal.

tion of Giphy, a GIF company.

Google, Facebook, Apple and

Amazon are closely monitoring

Europe’s proposals. While the

companies have publicly said they

want to work with the region’s

lawmakers and regulators, their

lobbying groups have argued that

Europe’s aggressive actions are

partially an effort to protect

homegrown industries.

“Popular tech services are in-

creasingly being developed out-

side of the E.U.,” said Christian

Borggreen, vice president of the

Computer and Communications

Industry Association, an industry

group in Brussels. “The E.U.

should strive to become a leader

in tech innovation, not just in tech

regulation.”

Amazon, Facebook, Apple and

Google declined to comment.

For years, Europe set the stand-

ard in tech regulation — only to

find that its efforts did not make

much of a dent as the tech behe-

moths continued to grow.

Consider that the European

Commission found Google guilty

of antitrust violations three times

from 2017 to 2019, resulting in

fines of roughly 8.25 billion euros,

or about $9.7 billion at current con-

version rates. But the cases each

took several years to complete,

giving Google ample time to se-

zon, Apple, Google and Facebook
were grilled by lawmakers in a
congressional hearing to scruti-
nize their power. All defended
themselves against criticism from
Democrats about anticompetitive
business practices and accusa-
tions from Republicans that they
were muzzling conservative
voices. On Thursday, all four com-
panies showed their financial
muscle by reporting billions of
dollars in profits and surging rev-
enue.
The momentum in the United
States is set to grow. The Justice
Department is expected to an-
nounce an antitrust case against
Google in the coming weeks. The
Federal Trade Commission and
state attorneys general are also
investigating Facebook, Apple
and Amazon for potential anti-
competitive behavior.
Those actions, coupled with the
efforts in Europe, represent a dou-
ble whammy for the tech giants. If
the proposed laws in Europe are
enacted, the policies could lead to
a major overhaul of the region’s
digital economy, where there are
more than 500 million consumers,
by regulating the tech companies
more like traditional industries
such as telecommunications and
finance.
“This is a new phase,” Margre-
the Vestager, the European Com-
mission executive vice president
who is leading the effort in Brus-
sels to write new laws, said in an
interview.
Ms. Vestager said the proposed
laws would lower hurdles to force
the tech companies to change and
even restrict them from moving
into new product areas. “At stake
is whether or not these markets
will be open and contestable and
innovative, or if they will just be
governed by these walled gardens
of de facto monopolies,” she said.
European officials are working
on the new laws against Big Tech
alongside more traditional tactics
such as antitrust investigations.
European Union officials are in-
vestigating whether Apple’s App
Store policies are anti-competi-
tive, and are preparing charges
against Amazon for abusing its e-
commerce dominance to box out
smaller rivals. The European Un-
ion is also reviewing Google’s pur-
chase of the wearables maker Fit-
bit, while Britain opened an inqui-
ry in June into Facebook’s acquisi-

cure its dominance in online ad-

vertising, smartphone software

and internet search. The mone-

tary penalties, which are small for

a company with more than $

billion in annual revenue, remain

tied up in court appeals.

Other legal efforts, such as Eu-

rope’s landmark privacy law

called the General Data Protec-

tion Regulation, were aimed at

many industries and were not just

aimed at the tech companies.

Since G.D.P.R. was enacted in

2018, it has been faulted for lack of

enforcement.

So over the past year, European

regulators and lawmakers began

a concerted effort to draw up new

laws that specifically homed in on

the tech companies’ businesses.

Much of the energy came from

officials in Brussels, where Euro-

pean Union leaders set policies for

the 27-nation bloc. In December,

Ms. Vestager, who had already

spent five years as the world’s top

tech industry watchdog, began a

new five-year term leading digital

policy and antitrust oversight.

She and her colleagues vowed to

take an even harder line.

They proposed new rules to

make it easier for regulators to be-

gin investigations against the tech

companies. One proposed law, the

Digital Services Act, would draw

more business boundaries for

search engines, marketplaces, so-

cial networks and app stores. Poli-

cymakers are debating barring

Amazon, Apple and others from

giving their products preferential

treatment in their digital stores.

Ms. Vestager said there was broad

political support for the ideas,

which could become law by next

year.

Among European countries,

Britain has become particularly

active in moving to rein in the tech

giants. Lawmakers are debating

the creation of a regulator to focus

on the largest tech companies,

holding them to new codes of con-

duct so they do not use exploit-

ative or exclusionary business

practices.

“We have crossed a line,” said

Andrea Coscelli, the head of Brit-

ain’s antitrust agency, the Compe-

tition and Markets Authority,

which published a 400-plus-page

report this month accusing

Google and Facebook of anticom-

petitive behavior in online adver-

tising. “Something needs to hap-

pen sooner rather than later, and it

needs to be done in an intelligent

way.”

Mr. Coscelli said the lack of spe-

cific tech regulation reminded him

of the lax oversight of banks be-

fore the 2008 financial crisis. Reg-

ulators should treat the tech gi-

ants more like formerly state-

owned enterprises such as British

Telecom and Deutsche Telekom,

he said. Starting in the 1980s,

those companies were often

blocked from practices like

bundling new services at reduced

prices, or moving into product ar-

eas where new companies were

emerging. Europe is now consid-

ered among the world’s most com-

petitive wireless markets.

In Germany, authorities said

they were debating rules to re-

strict how the tech companies use

their dominance in one area to en-

ter new markets. In recent years,

Apple has leveraged its strength

in smartphones and tablets to sub-

sidize its entrance into the video-

streaming market, Google has

used its search engine to offer

travel services and Facebook has

offered new e-commerce services

off its base of social networking.

“If a platform is so big and if a

platform has such a powerful posi-

tion, there are opportunities to

abuse this power,” said Andreas

Mundt, Germany’s top antitrust

regulator.

In France, policymakers are de-

bating a new law that would cen-

sor hate speech online, making

Facebook, YouTube and Twitter

legally liable for content posted by

users, though the proposal is al-

ready facing legal challenges.

Germany has adopted a similar

proposal, and Britain and the Eu-

ropean Union are considering

such measures as well. France is

also leading an effort with Italy

and the European Union to force

the tech companies to pay more

taxes.

Many hurdles remain before

the proposals become law. Some

question whether the regulations

would be effective, particularly if

they take years to enact. Others

said any laws could be watered

down during the legislative

process as companies pour

money into lobbying, or that in a

rush to get something done,

flawed policy will be put into

place.

“There is a desire to ‘go further,’

but European regulators are

struggling to define the specific

problems they want to fix,” said

Joe McNamee, a veteran internet

policy consultant in Brussels, who

is particularly concerned about

new online censorship rules.

“Badly designed measures are

unlikely to achieve their goals at

the same time as creating collat-

eral damage.”

William E. Kovacic, a professor

specializing in antitrust law at

George Washington University,

said that even if many of the pro-

posals did not become law, the in-

creased scrutiny alone would lead

the tech companies to change be-

havior.

“It’s like the policeman at your

elbow,” he said.

With New Laws Under Consideration, Europe Has Tech Giants in Its Sights

From Page A

“This is a new phase,” said Margrethe Vestager, a European Commission executive vice president.

ANS BRYS FOR THE NEW YORK TIMES

Andrea Coscelli said the lack of specific tech regulations re-

minded him of the lax oversight of banks before the 2008 crisis.

CMA

At least six draft rules

aim at the heart of the

businesses.

BD