EU Court: Ireland illegally aids Apple for 13 billion euros
The Court of Justice of the EU has annulled the General Court’s ruling on tax rulings adopted by Ireland in favor of Apple. Luxembourg judges confirm European Commission’s 2016 decision: Ireland granted Apple illegal aid that it must recoverAccording to the Commission’s estimates, Ireland granted Apple illegal tax advantages totalling EUR 100 million. 13 billion euros.
In 1991 and 2007 Ireland issued two so-called ‘tax rulings’ tax rulings in favour of two Apple group companies, Apple Sales International (Asi) and Apple Operations Europe (Aoe), which were incorporated as Irish companies but were not resident for tax purposes in Ireland. The rulings endorsed the methods used by Apple to determine their taxable profits in Ireland, relating to the trading activities of their respective Irish branches.
In 2016, the European Commission considered that excluding from the tax base the profits generated from the use of intellectual property licenses held by the Appland, essentially, because the headquarters of those companies were located outside Ireland and the management of those licences depended on decisions taken at the level of the Apple group in the United States, the tax rulings had granted those companies, from 1991 to 2014, unlawful State aid incompatible with the internal market, from which the Apple group as a whole had benefited. He then ordered Ireland to proceed with its recovery. According to estimates by the Commission, Ireland granted Apple illegal tax benefits totalling €13 billion.
In 2020, hearing appeals brought by Ireland and Apple, the General Court annulled the Commission’s decision, holding that the Commission had failed to demonstrate the existence of a selective advantage resulting from the adoption of the tax rulings in question and resulting in a preferential reduction of the tax base in Ireland. By its judgment, the Court, hearing an appeal brought by the Commission, annulled the General Court’s judgment and gave final judgment on the dispute.
According to the Court, the General Court erred when it held that the Commission had not sufficiently demonstrated that the intellectual property licences held by Apple and the related profits, generated by sales of Apple products outside the United States, should have been attributed, for tax purposes, to the Irish branches. In particular, the General Court wrongly held, on the one hand, that the Commission’s main reasoning was based on incorrect assessments as regards the normal taxation under the Irish tax law applicable in the case at hand and, secondly, upheld the objections raised by Ireland and by Apple against the factual assessments made by the Commission regarding the activities of the Irish branches and the activities outside those branches.
After having annulled the contested judgment, the Court considers that the state of the documents allows for to rule on appeals and that it is necessary to rule definitively on these within the limits of the dispute which remains pending before it. In that context, the Court confirms in particular the Commission’s approach according to which, under the relevant provision of Irish law relating to the calculation of non-resident corporate taxation, the activities of Apple’s branches in Ireland had to be compared not with the activities of other companies in the Apple group, such as a parent company in the United States, but precisely with those of other entities of those companies, in particular those of their headquarters located outside Ireland.
EU Court: Google fined 2.4 billion for domain abuse confirmed
The Court of Justice of the EU upholds the €2.4 billion fine imposed on Google for abusing its dominant position by favoring its own product comparison service. The appeal filed by Google and Alphabet was rejected.
By decision of 27 June 2017, the Commission found that, in thirteen countries of the European Economic Area (EEA), Google had given priority, on its general search results page, to the results of its own product comparator over those of competing product comparators. Google had in fact presented the search results of its product comparator in first position and had enhanced them within ‘boxes’, accompanying them with attractive visual and textual information. By contrast, the search results of competing product comparators appeared only as simple generic results (presented in the form of blue links) and were, for this reason, unlike the results of Google’s product comparator, susceptible to being demoted by adjustment algorithms in Google’s general search results pages.
The Commission concluded that Google had abused its dominant position on the market for general Internet search services as well as on that for specialised product search services and imposed fines on it. a fine of 2.42 billion euros, for the payment of which Alphabet, as the sole shareholder of Google, was held jointly and severally liable for an amount of 523.5 million euros.
Google and Alphabet challenged the Commission’s decision before the General Court of the European Union. By judgment of 10 November 2021, the General Court essentially dismissed the action and, in particular, upheld the fine. However, the General Court held that it had not been demonstrated that Google’s practice had had anti-competitive effects, even potential ones, on the general search market. Consequently, it annulled the Commission’s decision in so far as the Commission had found an infringement of the prohibition on abuse of a dominant position also with regard to the latter market. Google and Alphabet then filed an appeal before the Courtby which they request the annulment of the judgment of the General Court in so far as it dismissed their appeal, as well as the annulment of the Commission’s decision.
By its judgment of today, the Court dismisses the appeal and thus confirms the judgment of the General Court. The Court recalls that EU law does not penalise the very existence of a dominant position, but only the abusive exploitation of that position. In particular, conduct by undertakings in a dominant position which restricts competition on the merits and is therefore likely to cause harm to individual undertakings and consumers is prohibited. Such conduct includes conduct which, by means other than competition on the merits, hinders the maintenance or development of competition on a market where the level of competition is already weakened, precisely because of the presence of one or more undertakings in a dominant position.
The Court states that it cannot be considered, in general, that a dominant undertaking which applies to its own products or services more favourable treatment than that which it grants to those of its competitors is, irrespective of the circumstances of the case, behaving in a manner which departs from competition on the merits. It notes, however, that in the present case, the General Court has indeed established that, in the light of the characteristics of the market and the specific circumstances of the case at issue, Google’s conduct was discriminatory and did not fall within the scope of competition on the merits.
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