Europe’s highest court supports repression against Apple and Google

EU antitrust chief Margrethe Vestager has scored two important victories as Europe’s highest court backed her actions against Apple’s Irish tax deal and Google’s anti-competitive practices in two landmark cases.

Vestager, who ends her term in November, has gained notoriety by attacking Big Tech’s tax deals with some EU countries and trying to crack down on smaller rivals. The legal victories announced Tuesday could embolden her successor to take a similar step.

The head of the antitrust department welcomed the verdicts. “Today is a huge victory for European citizens and tax justice,” she said at the 10th Apple verdict, while praising the Google verdict as a great victory for digital justice.

In 2016, the European Commission ordered Apple to pay 13 billion euros ($14.4 billion) in back taxes to Ireland, finding that the iPhone maker had benefited for more than two decades from two Irish tax rulings that artificially reduced its tax burden to just 0.005 percent in 2014.

The Court of Justice of the EU in Luxembourg sided with Vestager.

“The Court of Justice has delivered its final judgment in this case and confirmed the 2016 decision of the European Commission: Ireland has granted Apple unlawful aid which it must recover,” the judges said.

They found that two Apple entities incorporated in Ireland benefit from more favourable tax treatment compared to resident companies taxed in Ireland, which cannot benefit from such tax rulings issued by the Irish tax authorities.

Apple said it paid $577 million in tax, or 12.5% ​​of profits generated in the country, under Ireland’s tax rules for the period from 2003 to 2014 covered by the EU investigation. The company said it was disappointed with the ruling.

“The European Commission is attempting to change the rules retroactively and ignore the fact that our income was already subject to tax in the U.S. under international tax law,” Apple said in a statement.

In a separate regulatory filing, Apple said it expects to take a one-time income tax charge of about $10 billion in the fourth quarter, which ends September 28.

Ireland, whose low tax rates have helped attract big tech companies to set up their European headquarters there, also challenged the EU ruling, saying its rules on taxing intellectual property transactions were in line with those in other Organisation for Economic Co-operation and Development (OECD) countries.

Yet Ireland cooperated with the revamp of global corporate tax rules and did the once unthinkable—withdrawing its opposition to scrapping its cherished 12.5 percent corporate tax rate. But its taxes on multinationals have actually increased since then.

Google’s Anti-Competitive Practices

The court also dismissed an appeal by Alphabet’s Google against a €2.42 billion ($2.67 billion) fine imposed by Vestager seven years ago, the first of three hefty fines imposed on the company for anti-competitive practices.

“Given the characteristics of the market and the specific circumstances of the case, Google’s conduct was discriminatory and fell outside the scope of competition on the merits,” the judges found.

Google expressed disappointment with the decision.

“This judgment relates to a very specific set of facts. We made changes in 2017 to comply with the European Commission’s decision,” the spokesman said.

In 2017, the Commission fined the world’s most popular internet search engine for using Google’s price comparison service to gain an unfair advantage over smaller European rivals.

Google has racked up 8.25 billion euros ($9.11 billion) in antitrust fines in the EU over the past decade. It has appealed two rulings relating to its Android mobile operating system and AdSense advertising service and is now awaiting the verdicts.

The company is also battling EU antitrust charges issued last year that could force it to sell part of its profitable ad tech business after regulators accused it of favoring its own advertising services.

Both decisions are final and cannot be appealed.