The European Court of Justice in Luxembourg hit Silicon Valley’s top two tech giants Tuesday with significant financial penalties, ordering Apple to pay Ireland $14.3 billion in back taxes and fining Google $2.6 billion for abuse of the market dominance of its shopping comparison service. File photo by Julien Warnand/EPA-EFE
The European Union’s highest court Tuesday hit two of Silicon Valley’s top tech giants with significant financial penalties, ordering Apple to pay Ireland $14.3 billion in back taxes and fining Google $2.6 billion for abusing its dominant market position.
The final ruling against Apple by the European Court of Justice concludes an eight-year wrangle over whether tax breaks Ireland gave the maker of iPhone and Macintosh computers broke EU laws on state aid which the European Commission argued meant the tax had to be paid — even though Dublin insisted it was owed nothing. Advertisement
Tuesday’s ruling upholds a 2016 European Commission decision that “Ireland granted Apple unlawful aid which Ireland is required to recover,” according to the judgment which was final, the court said in a news release.
The Irish government said it would abide by the ruling which applied to the way the profits of two Ireland-based Apple divisions were assessed for tax purposes between 1991 and 2014. Advertisement
The commission ruled at the time that the arrangments were a clear breach of EU competition law because rival firms were not able to access the same deal.
But Apple expressed dissatisfaction with the decision saying it appeared to be a case of Brussels gaming the system by “retroactively changing the rules”.
“This case has never been about how much tax we pay, but which government we are required to pay it to. We always pay all the taxes we owe wherever we operate and there has never been a special deal,” it said in a statement.
“The European Commission is trying to retroactively change the rules and ignore that, as required by international tax law, our income was already subject to taxes in the United States.
“We are disappointed with today’s decision as previously the General Court reviewed the facts and categorically annulled this case,” said Apple.
The ruling overturned an appeal against the 2016 decision won by Apple and Ireland in the General Court in 2020 which found the commission had not sufficiently established Apple Sales International and Apple Operations Europe “enjoyed a selective advantage.” It comes 10 months after a top legal counsel to the ECJ recommended revisiting the case. Advertisement
Separately, the ECJ threw out an appeal by Google against a $2.6 billion anti-trust fine levied by Brussels in 2017 for prioritizing its own shopping comparison service in searches over those of rivals.
The commission backed complainants’ allegations that the Mountain View-Calif.-headquartered tech giant operated an effective monopoly in the price comparison market by squeezing out potential competitors, finding Google had “abused its dominant position on the markets for online general searches and for specialized product searches.”
However, in 2021 Google appealed to the General Court which ruled the case that Google’s practices had anticompetitive effects on the market for general search services not proven but found that its conduct was discriminatory and upheld the $2.6 billion fine.
The court ruled that the commission properly weighed the seriousness of Google’s practices and determined that they were done intentionally to harm competitors.
Underscoring the “particularly serious nature of the infringement” the court said the offenses were intentional, and not the result of negligence.
“The General Court thus rules that, in reality, Google favors its own comparison shopping service over competing services, rather than a better result over another result,” it said.
Google took the case to the ECJ to appeal the fine arguing the judgment of the General Court should be set aside because it had dismissed their action and that the Commission decision be annulled. Advertisement
But the ECJ on Tuesday dismissed the appeal, thereby upholding the judgment of the General Court.
“EU law does not sanction the existence per se of a dominant position, but only the abusive exploitation thereof. In particular, the conduct of undertakings in a dominant position that has the effect of hindering competition on the merits and is thus likely to cause harm to individual undertakings and consumers is prohibited,” the court said in its ruling.
Google said it had long since implemented changes and that it was unhappy with the outcome.
“We are disappointed with the decision of the Court. This judgment relates to a very specific set of facts. We made changes back in 2017 to comply with the European Commission’s decision,” it said.
“Our approach has worked successfully for more than seven years, generating billions of clicks for more than 800 comparison shopping services.”
The European Competition Commissioner Margrethe Vestager hailed both decisions as victories for European Union taxpayers and consumers.
“Today is a huge win for European citizens and tax justice,” she said.
