EU Competition Commissioner Margrethe Vestager recently took on a wider role shaping legislation for digital companies.
Google, Starbucks Fend Off EU Regulators in Court
| le 24 September 2019
EU’s top court decides that Google shouldn’t have to remove results globally; Starbucks wins appeal against unpaid-tax ruling
Alphabet Inc. GOOG -0.92% ’s Google and Starbucks Corp. SBUX -1.17% scored legal victories against European Union regulators Tuesday, in court rulings that restrict the reach of the bloc’s privacy orders and deal a blow to its competition czar as she prepares to expand her regulatory powers.
The European Court of Justice ruled that Google doesn’t generally have to apply the EU’s “right to be forgotten” to versions of its search engine accessed outside the bloc’s borders, though judges left the door open for European regulators to order it to do so in specific cases.
Established in 2014 by another court decision, the right allows a person to request that search engines remove links including personal information from the results of web searches for his or her own name.
The decision from the EU’s top court is a victory for Google and the companies and free-speech advocates that supported it, because it avoids the creation of a general obligation. For four years, Google has been fighting an order from France’s privacy regulator to apply the EU principle globally.
Over that period, Google and its backers have argued that expanding the right to be forgotten would infringe on other nations’ sovereignty and encourage dictators and tyrants to assert control over content published beyond their countries’ borders.
“It’s good to see that the Court agreed with our arguments,” said Peter Fleischer, Google’s senior privacy counsel, adding that the company has sought to “strike a sensible balance between people’s rights of access to information and privacy.”
Also on Tuesday, Starbucks won an appeal against an order handed down in 2015 by EU Competition Commissioner Margrethe Vestager that had required the coffee giant to pay Dutch authorities €25.7 million ($28.27 million) in allegedly unpaid taxes.
Starbucks welcomed the decision by the EU’s second-highest court and said it “pays all of its taxes wherever they are due.”
In a separate ruling, the same court annulled a €33.6 million fine given to British multinational bank HSBC Holdings PLC, although it backed Ms. Vestager’s allegation that the bank was part of a cartel rigging the Euribor rate. An HSBC spokesperson said the ruling relates to alleged misconduct during the course of one month in 2007. “We have consistently disputed that our actions constituted anticompetitive behavior and are considering all aspects of the ruling and our legal options,” the spokesperson said.
Both the decisions can be appealed at the European Court of Justice. They come two weeks before Ms. Vestager—dubbed Europe’s “tax lady” by President Trump—assumes a more influential regulatory role over tech companies atop her competition powers.
Ms. Vestager said Tuesday that she would continue to go after sweetheart tax deals and investigate whether they result in illegal state aid.
But she also suggested that competition policy faces limitations. “The ultimate goal that all companies pay their fair share of tax can only be achieved by a combination of efforts to make legislative changes, enforce state aid rules and a change in corporate philosophies,” she said.
The General Court on Tuesday did uphold a tax decision that Ms. Vestager issued in 2015 that led to Luxembourg recovering €23.1 million from Fiat Chrysler Automobiles FCAU -3.13% NV.
The Starbucks and Fiat Chrysler cases were the first two big decisions Ms. Vestager took against multinational companies after the Washington-based International Consortium of Investigative Journalists reported in 2014 on Luxembourg’s tax dealings with big corporations. Ms. Vestager broadened the scope of her tax query beyond Luxembourg, requesting information from all 28 EU governments on their respective tax arrangements.
Those probes yielded a record decision against Apple Inc. in 2016, when Ms. Vestager ordered Ireland to recover $14.5 billion in allegedly unpaid taxes from the U.S. tech giant. Apple has appealed that ruling and last week its lawyers brought their arguments dismissing the Competition Commission’s case before the same judges who ruled in the Starbucks case.
Amazon.com Inc. has also appealed against Ms. Vestager’s 2017 order that it repay Luxembourg nearly $300 million in allegedly unpaid taxes. Other probes by her office, including against Anheuser-Busch InBev SA, Pfizer Inc. and Nike Inc., are ongoing.
Legal experts say Tuesday’s rulings fit with recently increasing toughness from EU courts toward the commission. “They’re really raising the standard of evidence that they require from the commission,” said Leigh Hancher, a senior adviser on competition law with U.S. legal firm Baker Botts. “We’re moving away from very formalistic cases. Now the court is saying, ‘it’s not enough—show us that someone got an economic advantage’.”
Ms. Vestager will face questions on taxation policy and the court rulings during hearings in the European Parliament on Oct. 8, before she can take office in her newly expanded role, EU lawmakers said.
“The verdict in the Starbucks case is a step back and competition commissioner Margrethe Vestager has to carry the can for that,” said Markus Ferber, a German center-right lawmaker who will grill her during the hearings.
Other lawmakers said the court decisions justify giving the EU more powers over tax policy. “Today’s rulings by the General Court show that we need much better EU-wide rules to end tax avoidance by multinationals,” said Sven Giegold, a German lawmaker.
Ms. Vestager’s incoming boss, European Commission President-elect Ursula von der Leyen has pledged to “tax profits where they are generated” and overhaul the corporate tax systems across the bloc, arguing that they “do not capture the new business models in the digital world.” A similar idea is under discussion in the Organisation for Economic Cooperation and Development, in which the commission participates. Ms. Vestager’s new portfolio will include taxation and other regulation of tech companies.