- Successful judgments against Apple and Google in Brussels' high court: ECJ rulings prevail
Tech Behemoths Apple and Google Suffer Defeat at EU Court
After a series of intense legal battles, tech giants Apple and Google faced a setback at the European Court of Justice (ECJ). The Luxembourg judges upheld a €2.4 billion fine imposed on Google and ordered Apple to pay €13 billion in back taxes. The European Commission celebrated these victories, with Competition Commissioner Margrethe Vestager commenting, "It's vital to demonstrate that tax justice is occasionally achievable for European taxpayers."
Ireland's Unlawful Aid to Apple
Apple was initially instructed to pay €13 billion in back taxes, along with interest, in 2016. However, following a 2020 judgment by the EU Court, the demand was deemed invalid. The Commission failed to substantiate that Apple's tax agreements with Ireland in 1991 and 2007 constituted unlawful state aid.
The EU aspires for free competition. Individual member states are prohibited from skewing this competition with special privileges for selected companies. Ireland and Luxembourg have received criticism over tax deals in the past.
The Commission contested the EU Court's decision and emerged victorious. The ECJ subsequently overturned the initial ruling and issued a final verdict: Ireland provided illegal aid to Apple, which must be recovered. Evidence was presented showing that certain profits generated from Apple product sales outside the United States should have been taxed in Ireland.
Apple expressed displeasure, stating that the case was never about the amount of tax the company paid but to which government it should be paid to. "We comply with all tax obligations in every country we operate, and there was no special arrangement. The European Commission seeks to modify regulations retroactively and ignores the fact that our income was already subject to taxation in the US in accordance with international tax laws. We are disappointed with today's verdict."
The Irish government acknowledged the ruling while maintaining its stance that it does not offer preferential tax treatment to companies or taxpayers. In the Apple case, the controversy is of historical significance only, as the relevant agreements are no longer valid.
Google Misuses Market Power Again
Google's ongoing dispute regarding the Google Shopping price comparison service led to a €2.4 billion fine in 2017. The EU Commission claimed that Google exploited its dominant position by prioritizing its service in general search results. Google reportedly featured its service prominently at the top with images and text, while competitors' results appeared lower down as a simple blue link.
As a result, EU Commission officials believed that users frequently chose Google's price comparison service results over competitors' due to their prominent placement. However, these competitors relied on traffic from Google's website to maintain their financial success. Hence, Google abused its dominant market position, according to the Brussels authorities in 2017. Google and its parent company, Alphabet, failed to challenge the EU fine at the EU Court initially but subsequently appealed to the higher EuGH without success. This decision has now upheld the billion-dollar fine imposed by the EU Commission.
Although it is not generally assumed that a leading company favoring its own products or services over competitors' is illegal, Google's behavior was judged discriminatory "considering the market's characteristics and the specific circumstances of the case."
Google disputed the decision
"We are dissatisfied with the court's verdict," stated a Google spokesperson. "The verdict is based on a specific case, and we made modifications in 2017 to comply with the Brussels authority's ruling. Our strategy has been successful for over seven years and has generated billions of clicks for over 800 price comparison services."
Meanwhile, Idealo rejoices: The comparison portal welcomed the ruling and described it as a triumph for the entire e-commerce sector and, above all, consumers. Albrecht von Sonntag, co-founder of the portal, expressed his elation, saying, "It's a historic day for competition and consumers in Europe." The Federal Association of Digital Publishers and Press Publishers (BDZV) and the Media Association of Free Press (MVFP) also commended the judges' decision and described it as groundbreaking.
A comprehensive victory for the EU Commission
Both decisions represent a significant achievement for the EU Commission and outgoing competition commissioner Margrethe Vestager. "These verdicts are a significant victory for European citizens and fair taxation," Vestager declared after announcing the verdict.
In Brussels, there has been an extensive struggle to prevent the distortions of competition by tech giants. In addition to laws like the Digital Markets Act (DMA), aimed at combating the dominance of large online platforms, the competition authorities of the EU Commission have imposed several fines on Google in recent years, totaling over eight billion euros. While the company has been able to absorb these fines due to its thriving online advertising business, it has necessitated alterations in its business model on some occasions.
The Brussels authority has also taken action against certain tax deals - including those involving Apple and Ireland, as well as Amazon and Luxembourg. Not all initiatives have been successful, and various rulings have been overturned by European courts. The ruling of the EuGH may also serve as a signal in these instances.
The United States government might express concerns over the EU's decision to demand additional taxes from Apple, considering the tech giant's significant operations and tax payments in the United States of America. Despite Apple's compliance with all tax obligations in the United States, the company is required to pay a substantial sum to the Irish government due to the EU Court's ruling regarding unlawful aid.
In light of the EU's ongoing legal battles with tech giants, companies operating in the United States of America may need to closely monitor policies and regulations pertaining to taxation and market practices in Europe.
