Taxation and antitrust: European Commission wins against Apple and Google

The EU justice system on Tuesday definitively ruled in favor of the European Commission against the American tech giants Apple and Google in two long-running legal cases with heavy financial stakes.

“This is a great victory for European citizens” but also “a victory for fair rules of the game and for tax justice”, rejoiced the Commissioner for Competition, Margrethe Vestager, very moved, during a press conference in Brussels.

The Court of Justice of the European Union (CJEU), the court of last instance, has ruled that Apple should repay €13 billion in back taxes to Ireland for having benefited from undue tax advantages, amounting to illegal state aid.

The ruling forced Apple to announce an exceptional charge of up to $10 billion (€9 billion). A bearable burden for a company that last year made a net profit of $97 billion (€88 billion).

Both groups immediately said they were “disappointed” in separate statements.

The Apple case dates back to 2016 when Brussels ordered the manufacturer of the famous iPhone to repay 13 billion euros to Ireland.

The sum corresponds to the profits from favorable tax treatment granted to the company from 2003 to 2014, in this country where Apple had repatriated all of its revenues earned in Europe (as well as in Africa, the Middle East and India).

– “Tax havens” –

According to the European Commission, Apple’s Irish subsidiary had paid a derisory effective tax rate on its European profits “ranging from 1% in 2003 to 0.005% in 2014”.

But in 2020, at first instance, the EU General Court annulled the decision of the European executive, a resounding slap in the face for Ms Vestager.

The Commission had lodged an appeal with the CJEU.

New twist in November 2023: in a non-binding opinion, but generally followed by the judges, the attorney general Giovanni Pitruzzella had called into question Apple’s victory.

He had proposed to the judges to annul the judgment and to refer the case back to the General Court of the EU “so that it can rule again on the substance”.

The Court, however, did not follow this opinion. The CJEU “decides definitively on the dispute and confirms the decision of the European Commission of 2016: Ireland granted Apple unlawful aid that that State is required to recover,” it explained.

Ireland will “respect” this decision, the government announced in Dublin.

Apple has always maintained that it received no preferential treatment.

“Our income was already subject to tax in the United States,” the group responded. “This case was never about the amount of taxes we pay, but about the government to which we are required to pay them.”

– Google forced to change its practices –

In the Google case, the judges confirmed a fine of 2.4 billion euros imposed in 2017 on the Mountain View group for abuse of a dominant position on the online search market.

This is the second largest financial penalty ever imposed by the EU in an antitrust case.

The Court considers that Google has indeed “abused its dominant position by favouring its own product comparison service”, Google Shopping.

“We are disappointed by (this) decision. We made changes in 2017 to comply with the European Commission’s decision,” the search engine champion responded.

Google is accused of making Google Shopping competitors virtually invisible to consumers for years.

Seized by the Californian giant, the EU General Court had already ruled in favor of the Commission, in an initial judgment delivered in November 2021. But Google had filed a new appeal, demanding the cancellation of the fine.

The case began in 2010 with the opening of an investigation following complaints from competitors.

This case is one of the major disputes opened by Brussels against Google, which has been fined a total of more than 8 billion euros for various breaches of competition law.

The group is also in the crosshairs of regulatory authorities in the United States. Since Monday, it has been facing its second major trial in less than a year against the American government, which accuses it of stifling competition in online advertising.

LNT with AFP