The European Union’s top court has recently issued two significant rulings in favor of the EU’s efforts to regulate major tech companies, marking a win for outgoing competition chief Margrethe Vestager. This follows a series of setbacks for her in EU courts.
In a conclusive ruling, the European Court of Justice ordered Apple to pay 13 billion euros ($14.3 billion) in back taxes to Ireland, concluding a prolonged legal dispute. The court stated that Ireland had granted Apple illegal state aid that must be recovered.
Simultaneously, the court upheld a 2.4 billion euro fine against Google, rejecting the company’s appeal concerning a 2017 penalty for abusing its market dominance in favor of its comparison shopping service.
Apple responded to the ruling by stating that it could face a potential earnings hit of up to $10 billion. However, this is unlikely to greatly affect the company, which reported global sales of $383 billion and a net profit of $97 billion for the year ending September 2023.
Vestager celebrated the court’s decisions as a significant victory for European citizens and for tax justice, affirming that the EU will continue to combat monopolistic practices. An emotional Vestager expressed her surprise at the win, stating, “I was ready to face the loss. It was the win that made me cry.”
Apple and Google expressed disappointment regarding the rulings. The Irish government, which houses Apple’s European headquarters and had contested the EU’s stance, stated it would comply with the court’s findings.
The legal battle regarding Apple began in 2016 when the European Commission claimed that Ireland permitted the tech giant to evade billions in taxes. The Commission estimated that Apple’s effective tax rate in Ireland was just one percent of its European profits in 2003, dropping to 0.005 percent by 2014.
Despite the ruling, Apple defended its tax practices, asserting that it pays all the taxes it owes wherever it operates. The latest ruling reversed a previous 2020 decision by the EU’s General Court that had annulled the order for Apple to pay back taxes.
Vestager expressed her relief over the court’s conclusion, noting the challenges faced by the EU in enforcing tax regulations, which had witnessed prior losses against companies like Amazon and Starbucks. She cautioned that significant profit shifting to low-tax jurisdictions continues to be an issue and advised her successor to prioritize addressing these concerns.
The fine imposed on Google adds to a series of substantial penalties for violating EU competition rules, totaling approximately eight billion euros from 2017 to 2019. Google expressed its dissatisfaction, stating that it had made changes to comply with the Commission’s previous decisions.
The tech giant is preparing for another legal challenge, with the European Court of Justice set to rule next week on another fine of around 1.49 billion euros. Additionally, Google is facing scrutiny in the United States, where the government has accused it of monopolizing online advertising and restricting competition, following a recent court ruling affirming its market dominance. The EU has echoed concerns regarding Google’s advertising technology, pushing for the company to divest part of its ad services to promote fair competition in the industry.