The Strategist

Google, Apple got in the European Commission's crosshairs once again

07/14/2016 - 16:12

The corporation is suspected that setting limits on advertising opportunities of partner companies.

re:publica/Gregor Fischer
re:publica/Gregor Fischer
Thursday, July 14, The European Commission has brought to Google new claims relating to promotional activities of the corporation. The idea is that the company, using a dominant position in online search, is limiting opportunities of partner companies to place advertisements of Google’s competitors. The company’s clients should not only place Goggle’s ads in the most favorable place. They also have no right to put banners of Google’s competitors near the corporation’s ads.

The Commission also believes that search results for some goods and services are drawn up in such a way that Google’s commercial partners occupy the first lines there. "Today we are even more confident that Google unfairly favors Google Shopping in the search results. This means that consumers cannot see results the most relevant to their search," - says the European Commission's statement posted on its webpage.

According to the European Commissioner for Competition Margrethe Vestager, Google by and large is preventing development of innovation and is restricting consumer choice.

Google has ten weeks to respond to the new European Commission’s claims. In case the suspicions are confirmed, the corporation may be fined up to 10 percent of annual income.

Meanwhile, the Irish Finance Minister Michael Noonan said in September or October, the European Commission is going to finally decide on investigation related to Apple Inc. The company now is under suspicions in tax evasion in the EU. As stated by Mr. Noonan during a press conference held after the meeting with Margrethe Vestager, "The commissioner told me that the decision will not be taken in July, but, more likely, in early autumn. I expect that it will be in September or beginning of October ... I have no information on how this decision will be presented, and what consequences it may bring". 

Recall that in 2014, the European Commission accused Ireland in entering into deals on tax with some corporations, allowing them to pay taxes lower than normal. Apple was accused of so-called transfer pricing. This means sale of goods between departments at domestic prices different from market. Such an approach allows to redistribute the company’s overall profit in favor of its subsidiaries located in countries with lower taxes. In Ireland, the corporate income tax accounts for only 12.5%, which is significantly lower than in many regions. In addition, according to the European Commission, Ireland agreed to understate taxable profit of Apple’s local units. Thus, according to the investigation, Apple was able to avoid paying tens of billions of dollars. According to experts, the European Commission now may impose a quite sustainable fine on the company. 

In recent years, scandals related to tax transactions broke out not only around Apple; companies like Google, Starbucks, Fiat have also been spotted. Besides Ireland, the European Commission opened an investigation in relation to the governments of the Netherlands and Luxembourg. Last October, the European Commission stated that tax benefits received by Fiat and Starbucks in the Netherlands and Luxembourg are illegal. The Commission ordered the companies to return the unpaid taxes of € 20-30 million in the budget of the countries where they enjoyed privileges.


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