Will the EU’s Digital Markets Act be taking 10% bites out of Apple?

From “Tech Giants Face New Rules in Europe, Backed by Huge Fines” ($) in Wednesday’s Wall Street Journal:

The European Union’s executive arm proposed two bills Tuesday—one focused on illegal content, the other on anticompetitive behavior—that would empower regulators in some cases to levy fines of up to 6% or 10% of annual world-wide revenue, or break up big tech companies to stop certain competitive abuses…

Together, the two strands of legislation amount to the biggest potential expansion of global tech regulation in years…

[Skipping section on the Digital Services Act, which wouldn’t be Apple’s main concern.]

The other EU bill, the Digital Markets Act, would pre-emptively ban certain behavior by what it deems to be gatekeepers—defined as companies with European revenue of at least 6.5 billion euros, equivalent to about $7.9 billion, or a market capitalization of at least 65 billion euros (some $79 billion), and which serve more than 10,000 active business customers and 45 million active end users in the bloc.

Such companies could, for instance, be blocked under the bill from tying the ability to access one of their services to purchasing for another core service from the gatekeeper. The law would also create other obligations toward smaller firms and end users, such as offering price transparency for online advertisers and allowing data portability for end users.

My take: The $79 billion cut-off is risible for a company like Apple, which is capitalized at $2 trillion. On the other hand, 10% of $274 billion (Apple’s fiscal 2020 revenue) is nothing to laugh at.

13 Comments

  1. David Emery said:
    Is there anyone in PEDland that thinks this is anything other than a money grab by the EU? I’d like to see a reasonable defense of this policy.

    4
    December 16, 2020
  2. Lalit Jagtap said:
    Why the EU think it’s ok to charge based on “annual world-wide revenue”? does the EU makes laws for its member countries or the whole world?

    I hope the EU executive team, think more creatively to figure out reasonable ways to earn revenue from Apple.

    5
    December 16, 2020
    • Bart Yee said:
      Yep, that value judgement sounds like Qualcomm’s charging for use of its part or patents based on the price of the whole device rather than just the parts or function.

      IMO, this is simply a set of punitive taxes written against mainly US multinational companies. I’ll bet these thresholds were written so that most EU companies would be excluded. As usual, EU doing a cash grab instead of creating viable business competition to stimulate their economies. Taxation without representation but then again, what does the EU know about constitutionality?

      Also, for perspective, a $27.45B fine would be about 40% of Apple’s 2020 $68.64B European revenue.

      3
      December 16, 2020
      • Gregg Thurman said:
        The US should send the EU a bill for the cost of maintaining a US military presence (protection from the Soviet Bear) in Europe since the end of WWII. How long would it have taken for the European economy to recover from WWII (if it could), had it not been for US subsidy of EU military protection and economic stimulus derived from the presence of US military personnel?

        3
        December 16, 2020
    • Gregg Thurman said:
      EU countries pioneered the VAT (Value Added Tax) as a way to reduce corporate tax by transferring corporate tax to the consumer, thereby making EU export products less expensive (IOW: more competitive) to importing countries.

      I am in agreement with the philosophy behind the VAT, as I’ve always been against taxing the goose that lays golden eggs.

      I am 100% against the attempts by the EU to tax defined corporations that are (by definition) all US-based. None of these initiatives would have surfaced had it not been a perception that the FAANG is/was exploiting European tax codes.

      The FAANG did not write those codes, EU governments did, and now they aren’t happy with the way they are being used. EU attempts to “fix” what they perceive as “exploits” by US firms have spilled over, in typical government excess, into punitive rules that harm the beneficiaries of their own making.

      5
      December 16, 2020
  3. Bart Yee said:
    Perhaps Apple should raise prices on goods and services in the EU and for EU customers by 25-40% and mark that portion to paying an EU mandated added tax? I’m sure this whole fiasco is still driven by long simmering resentment for the implosion of Nokia, Ericsson and the like, plus inability to keep ARM and other major tech businesses out of non-EU hands.

    2
    December 16, 2020
  4. John Konopka said:
    First of all, these are proposals, nothing has been voted on. Also, the Commission VP, Vestager, certainly has an itch to go against US companies.

    “The ruling is an especially stinging defeat for Vestager, who has campaigned for years to root out special tax deals and better regulate the power of the big U.S. tech companies, including Google, Amazon and Facebook. Trump has referred to her as the “tax lady” who “really hates the U.S.”

    Despite the setback, she vowed to carry on the fight. “The Commission will continue to look at aggressive tax planning measures under EU state aid rules to assess whether they result in illegal state aid,” she said.”

    https://techxplore.com/news/2020-07-apple-eu-court-case-billion.html

    Right now this gets her some good headlines. We’ll see what actually passes and how much it gets watered down by the courts. I can’t believe the courts would go along with fines based on WW revenue. That sounds like empty rhetoric.

    4
    December 16, 2020
    • David Emery said:
      Vestager is prima-facie evidence for why, despite all the rest of the crap, I think the Brits were right to take BREXIT. Did you realize that the European Parliament is basically an up-or-down rubber stamp? It doesn’t originate legislation, it only votes on whatever the Eurocrats or nations submit to it. It has no ability to actually submit legislation.

      1
      December 16, 2020
  5. Michael Goldfeder said:
    This is nothing more than payback by Margrethe Vestager, who was flattened and humiliated by the Luxembourg based General Court when that judicial body tossed to the curb her Commission’s 2016 ruling saying that Apple received a sweetheart tax deal from Ireland, when they quite clearly did not. That decision was taken up by her on appeal this past September 25, 2020. So the 15 bazillion Euros still remains in limbo for the moment.

    5
    December 16, 2020
    • Bart Yee said:
      Yep, that €15B or now $18.5B USD could have been out to so much more good use by Apple instead of floundering in a modest interest bearing escrow account. Personally, I think if the EU is denied on appeal, the court should direct the EU to pay a penalty of overall additional interest accrued or potential stock buyback price appreciation loss of buying power differential as a deterrent to these damn lawsuits. There should be consequences to forcing a company to lose the uses of that much money for so long a period of time.

      At the very least, the courts should force the EU to pay for all of Apple’s incurred legal expenses on this case, not to mention the slander of Apple’s good name and reputation.

      2
      December 16, 2020

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