Europe’s highest court has just dealt multi-billion dollar blows to Apple and Google

Apple lost its fight to avoid paying 13 billion euros ($14.4 billion) in taxes following a ruling by Europe’s top court on Tuesday, dealing a blow to the world’s most valuable company just a day after the iPhone maker unveiled a series of product improvements aimed at boosting sales.

In a separate ruling, the European Court of Justice also upheld a decision to impose a €2.4 billion ($2.6 billion) antitrust fine on Google.

Both CJEU rulings are final, meaning companies cannot appeal them.

The decisions underscore the European Union’s tough stance on big tech companies, which has passed sweeping regulations in recent years aimed at curbing the influence of the largest technology companies.

In its ruling against Apple, the ECJ upheld a 2016 decision by the European Commission that found Ireland had granted Apple illegal state aid that it was required to recover. The EU executive estimated that Ireland had granted Apple “illegal tax benefits” worth €13 billion.

According to Alex Haffner, a partner specialising in competition law at London law firm Fladgate, Apple will now have to “forfeit” €13 billion that has been held in an escrow account pending the outcome of the case.

“Perhaps more important will be the sense that EU authorities and courts are prepared to show their… strength to bring big tech companies to heel if necessary,” he added.

The tax case against Apple was part of an effort by outgoing EU Antitrust Commissioner Margrethe Vestager to crack down on deals between multinationals and EU countries that regulators deemed to constitute unfair state aid.

The Commission found at the time that Apple had benefited from two Irish tax rulings for more than two decades that artificially reduced its tax burden to just 0.005% in 2014.

Apple appealed the ruling, and the General Court of the European Union — a lower court of the CJEU — upheld the complaint in 2020, finding that regulators had not met the legal requirements to show that Apple had an unfair advantage.

However, on Tuesday, the higher court of the CJEU overturned the judgment of the Court of First Instance and sided with the Commission.

“Today is a huge victory for European citizens and tax justice,” Vestager said in a statement on Tuesday. “The Commission will continue to work on harmful tax competition and aggressive tax planning.”

Apple, meanwhile, said it was “disappointed” by the decision. “We always pay all taxes due wherever we operate, and there has never been a special agreement,” a company spokesperson added in a statement.

Apple said it paid more than $20 billion in taxes in the United States on the same profits the Commission said should have been taxed in Ireland.

Apple (AAPL) shares fell more than 1% in pre-market trading.

In a statement on the ruling, the Irish government said: “Ireland’s position has always been that Ireland does not grant preferential tax treatment to any company or taxpayer.”

Google’s fine upheld

Separately, the court dismissed an appeal by Google and its parent company Alphabet against a €2.4 billion fine imposed by the Commission in 2017.

Google has been fined for abusing its dominant position in the online search market by favouring its own price comparison service over those of its competitors in more than a dozen European countries.

At the time, Vestager said Google’s conduct had “deprived European consumers of real choice in services and the full benefits of innovation” offered by smaller rivals.

The Commission’s decision was upheld by the Supreme Court, but the companies appealed. The appeal was dismissed Tuesday, and Google was also ordered to pay the Commission’s legal fees. Alphabet (GOOGL) shares were unchanged in premarket trading.

“We are disappointed by the Court’s decision,” a Google spokesperson said, pointing to changes the company made to its shopping ads in Europe in 2017 to comply with the Commission’s ruling. The new approach generated “billions of clicks for over 800 comparison shopping sites,” the spokesman added.

In her statement, Vestager said the case against Google was a “catalyst for change,” challenging the notion that “digital companies should be free to operate.”

“It showed that even the most powerful technology companies can be held accountable,” she said.

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