Europe’s top court just delivered multi-billion-dollar blows to Apple and Google

London (CNN) — Apple has lost its fight to dodge a €13 billion ($14.4 billion) tax bill following a ruling by Europe’s top court Tuesday, which dealt a blow to the world’s most valuable company just a day after the iPhone maker unveiled a host of product upgrades to boost sales.

The European Court of Justice also upheld a €2.4 billion ($2.6 billion) antitrust fine against Google, in a separate decision.

The two ECJ rulings are final, which means the companies cannot appeal them.

The decisions highlight the European Union’s tough stance on Big Tech, which in recent years has extended to enacting sweeping regulations to curb the power of major tech companies.

In the ruling against Apple, the ECJ upheld a 2016 decision by the European Commission, which found that Ireland had granted Apple unlawful state aid that it was required to recover. According to estimates by the EU’s executive arm, Ireland had given Apple “illegal tax benefits” worth €13 billion.

According to Alex Haffner, a competition partner at London-based law firm Fladgate, Apple will now have to “forgo” €13 billion that had been kept in an escrow account pending the outcome of the case.

“Perhaps of more relevance will be the sense that, again, the EU authorities and courts are prepared to flex their… muscles to bring Big Tech to heel where necessary,” he added.

The tax case against Apple was part of a crackdown by the EU’s now outgoing antitrust chief Margrethe Vestager on deals between multinationals and EU countries that regulators saw as unfair state aid.

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

Apple challenged the ruling, and the EU’s General Court — the ECJ’s lower-level court — upheld the challenge in 2020, saying regulators had not met the legal standard to show that Apple had enjoyed an unfair advantage.

But on Tuesday, the ECJ’s higher Court of Justice set aside the judgment of the General Court and sided with the Commission.

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

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

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

Shares of Apple (AAPL) fell more than 1% in premarket trading.

In a statement on the ruling, the Irish government said: “The Irish position has always been that Ireland does not give preferential tax treatment to any companies or taxpayers.”

Google fine upheld

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

Google was fined for abusing its dominant position in online search by favoring its own price comparison shopping service over those of competitors in more than a dozen European countries.

At the time, Vestager said Google’s behavior “denied European consumers a genuine choice of services and the full benefits of innovation” by smaller rivals.

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

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

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

“It demonstrated that even the most powerful tech companies could be held accountable,” she said.

The-CNN-Wire
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