Europe's top court issued hefty rulings against two of the world's biggest tech companies on Tuesday, as it ordered Apple to pay €13 billion in unpaid taxes to Ireland, and fined Google €2.4 billion for abusing its market position to promote its online shopping service.
The European Court of Justice (ECJ) issued the eagerly anticipated rulings on Tuesday morning, giving the final word on two battles between the EU's competition chief and big tech that have been rumbling on for more than a decade.
Now in the final weeks of her ten-year tenure as EU competition commissioner, Margrethe Vestager told a press conference that the two rulings were "a big win for European citizens and for tax justice".
Apple to fork out €13 billion to Ireland
The first ruling involves more than €13 billion in unpaid taxes, which the European Commission says Apple owes to Ireland.
The tech company and the Irish tax authorities insist that tax rates agreed for Apple's Irish operations between 1991 and 2014 were legal under Irish law, while the Commission sees the deal as having constituted overly favourable tax treatment that amounted to illegal State aid.
The Commission first ruled that Apple owed €13 billion in taxes to Ireland in 2016. In 202o the EU's General Court overturned that decision, saying that the Commission had not proven that Apple's Irish operations enjoyed a "selective advantage" over its competitors.
Credit: Belga / James Arthur Gekiere
The Commission appealed the matter to the European Court of Justice, which on Tuesday overturned the decision of the General Court, and ruled that Apple did in fact owe the Irish state €13 billion, and that Ireland granted the tech giant "unlawful aid".
The case is not the first where Apple has come under fire from EU competition regulators. In March, the European Commission hit the tech company with a €1.8 billion fine for abuse of its dominant position in the music streaming market.
An Apple representative said that the company is "disappointed" with Tuesday's decision.
"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," they said.
"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 US," they added.
Google abusing dominant position in online shopping
Meanwhile, in a separate ruling published on Tuesday, the European Court of Justice upheld a €2.4 billion fine against Google (and its parent company Alphabet), for abusing its dominant position and squeezing out competition from rival shopping services.
Off the back of an investigation first launched in 2010, the Commission first handed down the €2.4 billion fine to Google in 2017, determining that the tech giant was "abusing its dominant position in several national online search markets", by favouring its own comparison shopping service (Google Shopping) over those of its competitors.
Google logo, during a visit to the Google company in Ghlin on the occasion of the 15th anniversary of the Google data centre in Belgium, Friday 21 October 2022. Credit: Belga / Nicolas Maeterlinck
The Commission fine was upheld by the EU's General Court, and an appeal lodged by Google and Alphabet was dismissed by the European Court of Justice on Tuesday. This decision was somewhat expected, as in January the General Attorney for the European Court of Justice recommended to “confirm the €2.4 billion fine”.
Similarly to Apple, it is not the first time that Google has been called out by competition watchdogs in Brussels. In 2018 the company was fined €4.8 billion in relation to the Android mobile phone operating system (later lowered to €4.1 billion), and the following year Google was fined €1.5 billion over violations associated with its AdSense advertising service.
An emotional Vestager surprised at victory
In a press conference shortly after the two landmark rulings were published, Vestager admitted that she was surprised by the outcome of the Apple case, and said she was expecting to have to field questions from journalists with a "stiff upper lip" in the face of a defeat.
"Everybody around me said brace for a negative impact... [but] it was the win that made me cry. Because it is very important. It is very important to show European tax payers that once in a while, tax justice can be done," she said, getting teary eyed when acknowledging the hard work of her "formidable team" over the past decade.
Vestager said that the main takeaway from the Apple case is that Member States are free to set their own tax rules, but they then need to abide by them.
"Member States have the exclusive competence to define their corporate tax system," she said, but noted that the Commission "can exercise control to avoid that undertakings receive an unfair tax advantage through rulings that derogate from national law, domestic case law, or administrative practices".
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"Once the Member States have exercised their fiscal sovereignty, the tax administration needs to abide to its own rules," she warned.
Asked by one reporter what message Tuesday's rulings send to big tech, Vestager said that her department will continue to "go after" suspected abuses of dominant positions, and quipped that "maybe it's better to be a compliant company".
"So if there is a message, well, it's easier and better to be compliant, also because it challenges yourself and forces you to be more innovative than you would otherwise have been," she added.
