Apple Hits Back at EU Law in Court

[Sophisticatednut]

I had this exact reaction when I saw the title.

The more appropriate way to report on this story involves not editorialized the headline in this way.

Well also the risk the court might even rule parts clarified and giving Apple less leeway. As well as the intention of said law over form.

And Apple case isn’t looking good regarding annulling the law.

Annulment of legal acts by the Court of Justice​

• The Court has found that in addition to acts like regulations, decisions and directives, which are defined in Article 288 TFEU as binding, it is the content (and intention) of the measure that matters, rather than the form (in Case C-316/91 European Parliament v Council). Thus, the legality of other types of acts, such as Council conclusions, can be contestable (in Case C-27/04 Commission v Council).

Bringing an action for annulment

• An action must be brought within 2 months of the act’s publication or of its notification to the applicant. A further 10 days’ extension to allow for postal delays on account of distance exists under Article 51 of the Rules of Procedure of the Court of Justice — see summary. If the act is not published or notified, the deadline runs from the point at which the applicant gained knowledge about it by other means.
• Non-privileged applicants must establish that they have had an act addressed to them or that the act was both of direct concern (see Case C-486/01 Front national v European Parliament) and of individual concern to them (see Case C-25/62 Plaumann v Commission).

Grounds for the annulment of an act

Article 263 TFEU (paragraph 2) sets out the following grounds for annulling an act:

• lack of competence;
• infringement of an essential procedural requirement, for example the need to respect an institution’s prerogatives before taking a decision, as in the requirement to consult in the Isoglucose case(Cases C-138/79 SA Roquette Frères v Council and C-139/79 Maizena GmbH v Council);
• infringement of the treaties or of the Charter of Fundamental Rights;
• infringement of any rule of law relating to the application of the treaties; and
• the misuse of powers (the applicant must be able to prove on the basis of facts that the contested act was adopted for unauthorised purposes (Case C-23/76 Pellegrini v Commission).

Annulment of an act

Article 264 TFEU is the legal basis for the annulment of an act.

• Where the action for annulment is well founded, the Court declares the act void.
• Where the Court considers it necessary, it can state which of the effects of the act that it has declared void must be considered as definitive. In other words, it can declare certain aspects of the challenged act operative in the interests of:
  • the need for legal certainty (see, for example, Case C-21/94 European Parliament v Council); or
  • the need to suspend the effects of annulment until a competent institution adopts an act to replace the annulled one.

@I7guy Its not looking that promising unless they have something meaningful up their sleeves

 

[raythompsontn]

It’s getting harder and harder to justify supporting Apple with my money.

Simple solution. Don't.

 

[surferfb]

There is no reason to force Walmart to provide shelf space to competitors. Why? Because a competitor can easily buy a plot of land next to Walmart and build a competing store. That's the beauty of free markets. Competitors keep each other in check. This is (was) not possible on smartphones, especially iPhones. There is only one app store.

There is no reason to force Apple to provide shelf space to competitors. Why? because a competitor can easily build an app on Android, Windows, or the Web. And as much as you keep ignoring it, there are a TON of app stores on Android. The fact that (practically) no one uses them actually is a strong point in Apple's favor that forcing Apple open isn't going to lower prices or improve competition, but will rather increase everyone's risk with little to no consumer benefit.

 

[MilaM]

What gives you the right to publish software on any platform you choose bypassing the owner?

Why should I not be allowed to run third-party software on a device and operating system I bought legally?

 

[Happy_John]

No, it started because you had a competition minister (Vestager) who was hopelessly biased against Big Tech and went looking for reasons to go after them, and used the Ireland tax arrangement to do so when it came to Apple. Under Irish law, Apple didn't owe the tax, because why would a non-resident company owe taxes to Ireland on sales that happen outside of Ireland? It's like saying BMW owes tax to the US on Canadian sales because BMW's North American headquarters is in the US. It's ludicrous.

The first court smacked her down, but she got the higher court to overturn it. That's life, but most independent observers were shocked at the higher ruling. So, in effect, the EU stole tax revenue from the US (because Apple had long ago paid the tax in the US by the time the ruling came down) and gave it to Ireland who didn't want it. Which is why many over here, including the current US administration, don't think the EU plays fair like they claim to.

There's a lot of problems with what you're saying here, but the most glaring one is that you are talking about Apple as a non-resident company.

Apple, based in Cupertino, sells relatively few iPhones worldwide. Apple Distribution International sells a hell of a lot of iPhones worldwide. Apple Distribution International is a business entity registered in Ireland and based in Co Cork, in Ireland.

AS I've aid before, thee situation makes no sense if you think the EU is a nation. It isn't. Nations who are members of the EU still retain their national soverignity, and this sovereignty includes the right to manage and set taxes.

What happened, however, was that the Irish government was not demanding appropriate tax from ADI, and soveignity allows them to do so, due to the loopholes in the Irish corporate tax system hat allows for "Double Sandwiches" - so far, nomproblem.

Except the tax not collected by the Irish government should have been distributed to most other EU countries, essentially anywhere that ADI was doing business in the EU, and those governments wanted their due share. Because it was not that the Irish government waived their own portion of the tax cut, but also waived other European governments' right to their tax cut, which they were not happy about.

It was at this point that the EU became involved, due to complaints from the individual national government to the EU to get the Irish government to collect the tax those government felt was due to them. The EU did not get involved, as you are claiming, because of some grudge Vestager held again Apple. Because this is real life, not a Hollywood drama.

The result was that the tax, ruled by court as obligatory for Apple to pay, was out into escrow, but the Irish government refused to accept payment. The transaction was never completed for years, and so Apple never paid.

But ti was always Apple's reposnsibility to pay. It w snot the Irish government's obligation to pay, but only to portion out the payments from Apple to the various European government. They did not do this, but again, it is not a soap opera or Hollywood film, and there were complex reason why they chose to to do it.

Overdramaticising this as some kind of emotion grudge only serves to miss the details of what actually happened.

 

[MilaM]

The fact that (practically) no one uses them actually is a strong point in Apple's favor that forcing Apple open isn't going to lower prices or improve competition, but will rather increase everyone's risk with little to no consumer benefit.

I don't expect lower prices for digital goods, really. The potential savings for the individual customer will probably be quite small.

The real benefits will be elsewhere:

More convenience when buying in app (for example ebooks)
Better integration of third-party accessories like watches, headphones
Easier access to open-source apps through third-party stores
Alternatives to iCloud backup and photos and file syncing
Better integration of alternative payment providers
Support for better on device IDEs
Maybe an alternative CarPlay like service?
Better file management on device

 

[Sophisticatednut]

I don't believe that. There are certain tools that will only be sold to authorized shops. As far as non-oem parts, sure tires and brake pads. Put a non-oem rod (as an example) in your vehicle and the engine fails on that rod, you won't be able to get warranty service.

Do you have any example in mind of said tools and I can check if they might be excepted.

You can put a non OEM rod or block etc. As long as they meet the same minimal technical specifications it’s fully legal. You might need to prove the part you or any other replaced is correctly specified. The vehicle block exception allows spareparts manufacturers to make the parts to specifications and the manufacturer would need to prove the part was responsible and not fulfilling the required technical requirements.

 

[surferfb]

Actually, why talk about things that you don't really grok?

I actually know quite a bit about the Ireland tax case, thank you very much. And certainly a lot more than the frequent "APPLE WASN'T PAYING TAXES" posters we see in these threads. The ECJ’s ruling was an absurd overreach that tramples on Member states’ right to set their own tax policy, misinterprets state aid rules and rules that tax policy that applied to any company in Ireland was an illegal subsidy for Apple. There’s a reason most observers were flabbergasted when the ECJ ruled the way it did. For example, this expert, who said the ruling "totally contradict[ed] precedent, which the very same court handed down over the last two years" and "now the case law is a mess."

Apple was paying sales tax to the appropriate jurisdictions, but they were (legally) delaying paying taxes on the profit made on those sales to the rightful recipient of said taxes, the United States. In fact, Apple paid taxes on that money to the US in 2018, which the US had to return to Apple once the EU effectively stole the money from US taxpayers to give to a country that didn't want it, and argued in court that it was not entitled to. Ireland agreed that they didn't have any right to tax Apple on that money, and any sane person would think the same thing. Again, why on Earth does Apple owe taxes to Ireland, rather than the US, on their profit made in France and Germany?

That profit should have been (and was!) booked in the US, as it was Apple’s profit, not the Irish subsidiary's. The fact that Apple was delaying paying US taxes on it should have been none of the EU’s business, but Vestager had her vendetta, the EU’s highest court decided that giving unearned billions to an EU country was more important than following their own precedent, so here we are.

Why should anyone trust any EU country's tax law if an overzealous regulator can come in decades later and decide their tax law is illegal (despite the fact that EU member states are supposed to have a right to set their own tax policy)? It's honestly amazing how the EU constantly shoots itself in the foot when it comes to investment and innovation.

 

[I7guy]

Wouldn't the world have been so much better if:

* electricity had never been standardized within countries - imagine not being able to use a new device because it only works on Edison power, not Westinghouse power (which is the only power available in your neighborhood), in 2025. Sure, we have power differences across the world, but converters are freely available... oh but converters between the two formats wouldn't be allowed because of patents, licensing, etc. Ah, but you can move to another city if you care about using that device enough, right?

Because electricity is not dangerous in the least, right?. Should car companies be forced to produce cars where every part is interoperable. Or should for profit companies that provide consumer services be able to develop an sell unique items?

* the Internet had never been standardized - only Apple devices can communicate using AppleTalk v.2025 (as it's a proprietary standard, encumbered by licensing and NDAs). Oh, but I'm sure the world's routers will gladly pay Apple for the privilege of carrying AppleTalk traffic.

The silliness can be taken to the nth level. It is in the best interests for society to have a standard on some things that benefit the common interest. It is also a benefit to have companies develop proprietary products that enhance society.

* the floppy disk, cassette tape, VHS tape, the PC motherboard and BIOS, CDs, DVDs, etc. had never become standardized. (Yes there were format wars, but ultimately one format prevailed above all others as the de-facto standard) Imagine if the iPod could *only* play Apple-formatted audio files (no MP3 for you!).

The market would have spoken as it should have if ipod could not play mp3s. That is a consumer decision and not a government decision.

When it comes to accessories and device interoperability, there is usually a huge market advantage to making your product interoperable. The only reason Apple can "get away" with making proprietary ports and standards is because of their size. But history has shown us time and time and time again that proprietary standards never last long-term, and open standards nearly always prevail. Open standards are a good thing.

This is a consumer decision and not a government decision.

 

[chmania]

That profit should have been (and was!) booked in the US,

Hmm, not in the US, but in China and Taiwan...without those Chinese-speaking people, Apple might not even exist...

 

[jlc1978]

I will sit this one out. You boys have your fun. 🙂

Same here, I'm grabbing some popcorn and enjoying the show.
What's the over under on time to 500 posts?

 

[I7guy]

Do you have any example in mind of said tools and I can check if they might be excepted.

Nope, other than I know there are proprietary tools. But since you and I can't prove or disprove the statement, it was more of a speculation. Of course cost is a factor and some tools costs into the tens of thousands of dollars...but yeah that's not this conversation.

You can put a non OEM rod or block etc. As long as they meet the same minimal technical specifications it’s fully legal. You might need to prove the part you or any other replaced is correctly specified. The vehicle block exception allows spareparts manufacturers to make the parts to specifications and the manufacturer would need to prove the part was responsible and not fulfilling the required technical requirements.

Right, and there could be multiple reasons why this warranty service was denied and to be fought in court.

 

[I7guy]

Why should I not be allowed to run third-party software on a device and operating system I bought legally?

You are not being stopped. But the manufacturer doesn't have to help you. (I don't know, seems like the same going around in circles)

 

[Sophisticatednut]

I actually know quite a bit about the Ireland tax case, thank you very much. And certainly a lot more than the frequent "APPLE WASN'T PAYING TAXES" posters we see in these threads. The ECJ’s ruling was an absurd overreach that tramples on Member states’ right to set their own tax policy, misinterprets state aid rules and rules that tax policy that applied to any company in Ireland was an illegal subsidy for Apple. There’s a reason most observers were flabbergasted when the ECJ ruled the way it did. For example, this expert, who said the ruling "totally contradict[ed] precedent, which the very same court handed down over the last two years" and "now the case law is a mess."

Apple was paying sales tax to the appropriate jurisdictions, but they were (legally) delaying paying taxes on the profit made on those sales to the rightful recipient of said taxes, the United States. In fact, Apple paid taxes on that money to the US in 2018, which the US had to return to Apple once the EU effectively stole the money from US taxpayers to give to a country that didn't want it, and argued in court that it was not entitled to. Ireland agreed that they didn't have any right to tax Apple on that money, and any sane person would think the same thing. Again, why on Earth does Apple owe taxes to Ireland, rather than the US, on their profit made in France and Germany?

That profit should have been (and was!) booked in the US, as it was Apple’s profit, not the Irish subsidiary's. The fact that Apple was delaying paying US taxes on it should have been none of the EU’s business, but Vestager had her vendetta, the EU’s highest court decided that giving unearned billions to an EU country was more important than following their own precedent, so here we are.

Why should anyone trust any EU country's tax law if an overzealous regulator can come in decades later and decide their tax law is illegal (despite the fact that EU member states are supposed to have a right to set their own tax policy)? It's honestly amazing how the EU constantly shoots itself in the foot when it comes to investment and innovation.

Simpels.

Profits exiting the EU market is taxed in EU. The fact the U.S. want to tax them is of no consequence. VAT isn’t the same tax for profits.
Eu have a single market hence why most of the revenue is registered in Ireland for the entire blocks revenue.

Apple could have payed taxes to the U.S. immediately and it would have made zero difference to EU. Eu isn’t responsible for the U.S. giving back taxes as we don’t share jurisdiction

 

[Sophisticatednut]

Nope, other than I know there are proprietary tools. But since you and I can't prove or disprove the statement, it was more of a speculation. Of course cost is a factor and some tools costs into the tens of thousands of dollars...but yeah that's not this conversation.

Right, and there could be multiple reasons why this warranty service was denied and to be fought in court.

Well I can only reference the laws that seems to provide practically unfettered access for spareparts and tools. But fair.

It can be many reasons but not for off label part with the proper technical specifications equivalent to OEM can’t be treated differently in warranty terms. And it’s largely put to the consumer advocacy courts that would drive the case for failure to uphold the warranty.

 

[chmania]

Apple hits back at EU Law in Court...hmm...

Taken some baseball bats with them?

 

[surferfb]

Simpels.

Profits exiting the EU market is taxed in EU. The fact the U.S. want to tax them is of no consequence. VAT isn’t the same tax for profits.
Eu have a single market hence why most of the revenue is registered in Ireland for the entire blocks revenue.

Apple could have payed taxes to the U.S. immediately and it would have made zero difference to EU. Eu isn’t responsible for the U.S. giving back taxes as we don’t share jurisdiction

This case wasn’t about taxing profits made in the EU. It was about the EU Commission retroactively trying to assign taxing rights over profits everyone agreed weren’t earned there, because the U.S. was slow to collect them. That’s seizing money that was never Ireland's in the first place.

You’re confusing revenue generated in the EU with profit earned in the EU, and treating the EU as a single taxing authority which it isn’t. Corporate income tax is not harmonized in the EU. It’s governed by national tax laws, not EU-wide ones. Ireland explicitly agreed that Apple’s profit wasn’t Irish profit, and Ireland didn’t break any tax laws. The EU Commission wasn’t claiming Apple owed taxes to the EU as a bloc. It was demanding that Ireland retroactively charge taxes it never had a right to, based on profits largely attributable to Apple’s U.S. R&D, IP, and executive functions.

The irony is that Ireland said “we’re not entitled to this money,” and the U.S. said “we are,” but the EU Commission still insisted Ireland collect it. That’s not “taxing profits in the EU.” That’s an EU agency trying to confiscate untaxed global profit via legal backdoor not based on where value was created, but where a tax mismatch existed. It absolutely flouts international tax norms that profit is taxed where the value is created, not where the customers are located. (And it's not me that is saying the EC's interpretation and the court ruling flouts international tax law, but organizations like the Organization for Economic Cooperation and Development.)

Imagine Volkswagen has a U.S. subsidiary based in Texas, which coordinates sales across North America but books most of its profits from U.S. car sales in Germany, where the R&D, management, and intellectual property reside. Now imagine Trump comes after Texas, claiming that Texas illegally gave Volkswagen a “sweetheart deal” because Texas didn’t tax the global profits of Volkswagen that never legally belonged in the U.S. tax base to begin with.

Texas responds, “We followed U.S. law. These profits weren’t earned here. They were booked in Germany and taxed (or deferred) according to German and OECD rules. We have no legal basis to claim them.”

Then the U.S. says: “Doesn’t matter. You could have taxed it. BMW needs to pay you $14 billion.” Would the EU, or Germany, find that acceptable? Probably not. Because the value creation happened in Germany, the income was taxed in Germany according to international tax norms, Texas followed the law, and the U.S. is now retroactively inventing tax liability. That’s what the EU did to Ireland and Apple.

 

[Happy_John]

This case wasn’t about taxing profits made in the EU. It was about the EU Commission retroactively trying to assign taxing rights over profits everyone agreed weren’t earned there, because the U.S. was slow to collect them. That’s seizing money that was never yours in the first place.

Imagine Volkswagen has a U.S. subsidiary based in Texas, which coordinates sales across North America but books most of its profits from U.S. car sales in Germany, where the R&D, management, and intellectual property reside. Now imagine Trump comes after Texas, claiming that Texas illegally gave Volkswagen a “sweetheart deal” because Texas didn’t tax the global profits of Volkswagen that never legally belonged in the U.S. tax base to begin with.

Texas responds, “We followed U.S. law. These profits weren’t earned here. They were booked in Germany and taxed (or deferred) according to German and OECD rules. We have no legal basis to claim them.”

Then the U.S. says: “Doesn’t matter. You could have taxed it. BMW needs to pay you $14 billion.” Would the EU, or Germany, find that acceptable? Probably not. Because the value creation happened in Germany, the income was taxed in Germany according to international tax norms, Texas followed the law, and the U.S. is now retroactively inventing tax liability. That’s what the EU did to Ireland and Apple.

And it's not me that is saying the EC's interpretation flouts international tax law, but organizations like the EU General Court and the Organization for Economic Cooperation and Development.

You're assuming that it was the US-based Apple that were making the profits. It wasn't. It was Apple Distribution International, which is a company registered in Ireland, that recorded the revenue on its books, rather than in the USA or in other EU states.

So the revenue was generated and earned within the EU.

 

[chmania]

It was about the EU Commission retroactively trying to assign taxing rights over profits everyone agreed weren’t earned there, because the U.S. was slow to collect them.

Who is this everyone?
We want that tax to remain in the EU for the benefit of the EU. The US doesn't produce much, so why should it receive any? Let the lion's share go to China and Taiwan!

 

[surferfb]

You're assuming that it was the US-based Apple that were making the profits. It wasn't. It was Apple Distribution International, which is a company registered in Ireland, that recorded the revenue on its books, rather than in the USA or in other EU states.

So the revenue was generated and earned within the EU.

That held the profit until it was repatriated into the US, which happened in 2018. It’s not a hypothetical.

The arrangement was used to delay paying taxes to the US. Apple Distribution has a license to sell Apple devices, but the profit was generated in the US. It’s complicated, but not rocket science.

Who is this everyone?
We want that tax to remain in the EU for the benefit of the EU. The US doesn't produce much, so why should it receive any? Let the lion's share go to China and Taiwan!

Apple, Ireland, even the EU never claimed Ireland was legally entitled to the money under tax law. The entire case was about asserting a competition law violation in order to force Ireland to collect tax it otherwise had no legal basis to claim.

You’re making a sovereignty argument; “we want the tax to stay in the EU”, but that’s not how international tax works. The world doesn’t function on who wants the money most. It works on where value is created, where IP is owned, where risk is borne, and where management functions happen. In Apple’s case, that’s overwhelmingly the U.S.

 

[chmania]

That held the profit until it was repatriated into the US, which happened in 2018. It’s not a hypothetical.

The arrangement was used to delay paying taxes to the US. Apple Distribution has a license to sell Apple devices, but the profit was generated in the US. It’s complicated, but not rocket science.


Apple, Ireland, even the EU never claimed Ireland was legally entitled to the money under tax law. The entire case was about asserting a competition law violation in order to force Ireland to collect tax it otherwise had no legal basis to claim.

You’re making a sovereignty argument; “we want the tax to stay in the EU”, but that’s not how international tax works. The world doesn’t function on who wants the money most. It works on where value is created, where IP is owned, where risk is borne, and where management functions happen. In Apple’s case, that’s overwhelmingly the U.S.

The products sold by Apple Ireland never touch US shores; they travel directly from China to the relevant countries, bypassing both North and South America. Taxes must be paid in those countries where the goods pass through and stop. Any money that moves from Apple Ireland to the US must also be taxed.

 

[MilaM]

You’re making a sovereignty argument; “we want the tax to stay in the EU”, but that’s not how international tax works. The world doesn’t function on who wants the money most. It works on where value is created, where IP is owned, where risk is borne, and where management functions happen. In Apple’s case, that’s overwhelmingly the U.S.

Roughly every other direct Apple employee works outside the US. I think it's not far-fetched to deduce from this, that a lot of value creation is happening in other countries too. There is a large engineering hub in Munich as far as I know. There are more than 6000 people working for Apple in Ireland.

I really don't understand all the details of the Apple-Ireland-EU case. But I'm happy for the Irish people that they have a nice tax windfall now. I'm sure they fill find worthy causes to support with this money.

 

[delsoul]

Get em’, Apple! Enough is enough. EU is always moaning about everything and they give ZERO concessions or meet half way, it’s always their way or the highway. It takes two to tango, hope Apple stick its to them hard.

 

[sledgehammer89]

I wonder why Apple allow answering iMessage with a non-Apple external Keyboard, but not with my Garmin watch.

 

[555gallardo]

Welp, here's news 4 U: after 11 years or whatever, and a pandemic to entice, Apple finally added the option to sent someone a link to join a FaceTime call on any device they please. Work in a web browser to boot, and get this, isn't limited to Safari for Windows. Wait....

Open FaceTime, tap the link, bottom left, and, well, it's obvious.

Damn, I totally forgot about that being announced at some point. Thanks, in fact!