The European Union’s top court has ruled against Apple Inc. and Google LLC in a pair of cases that focused on their tax and e-commerce practices, respectively.

The Apple case revolved around the effective tax rate that applied to the company in Ireland until 2014. Google, in turn, turned to the European Court of Justice, or CJEU, over a €2.4 billion fine it received seven years ago. Antitrust officials issued the penalty over the search giant’s Google Shopping e-commerce service.

EU tax rules

For over a decade, Apple collected much of the revenue it generated from EU customers through two subsidiaries incorporated in Ireland. Between 2003 and 2014, those subsidiaries paid an effective tax rate as low as 0.005%. The European Commission, the EU’s executive arm, ruled that this rate was too low in 2016 and ordered Apple to pay €13 billion worth of back taxes plus interest.

The iPhone maker responded to the ruling by launching a multiyear legal push to reverse its 11-figure tax bill. The EU’s second highest court, the General Court, sided with Apple in 2020 and found that the legal reasoning on which the European Commission based its decision was erroneous. Today’s ruling from the CJEU reverses the lower court’s decision. 

“In particular, the General Court erred when it ruled that the Commission’s primary line of reasoning was based on erroneous assessments of normal taxation under the Irish tax law applicable in the case,” the CJEU ruled.

Apple said in a statement responding to the ruling that “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. 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 U.S.”

Google Shopping

In a separate ruling, the CJEU today upheld a 2017 decision by the European Commission to fine Google €2.4 billion. Officials issued the penalty after finding that the company gave its Google Shopping service an unfair advantage over rivals. The Alphabet Inc. unit initially appealed the decision with the General Court, the EU’s second-highest court, and brought the case before the CJEU after failing to secure a favorable ruling. 

Google Shopping is an e-commerce service that helps consumers browse online stores’ product catalogs. It also includes a tool for comparing the prices offered by those stores. In 2017, the European Commission determined that Google unfairly boosted Google Shopping’s search ranking at the expense of competing services.

“We are disappointed with the decision of the Court,” a Google spokesperson said today. “This judgment relates to a very specific set of facts. We made changes back in 2017 to comply with the European Commission’s decision. Our approach has worked successfully for more than seven years, generating billions of clicks for more than 800 comparison shopping services.”

Today’s rulings come as Apple and Google continue facing regulatory scrutiny in the EU. In March, the European Commission launched a probe to evaluate how well Google and a number of other tech giants comply with its DMA regulation. More recently, EU officials tentatively concluded that Apple had breached the DMA with some of the App Store’s developer terms of service.

Image: Unsplash