Short Reads

European Commission orders the recovery of State aid of around EUR 250 million from Amazon

European Commission orders the recovery of State aid of around EUR 25

European Commission orders the recovery of State aid of around EUR 250 million from Amazon

01.11.2017 NL law

On 4 October 2017, after a long investigation, the European Commission held that a tax ruling between Amazon and Luxembourg constituted illegal State aid [see our November 2015 Newsletter]. The Commission ordered Luxembourg to recover this aid from Amazon, which is estimated to be around EUR 250 million.

The Commission explained that the tax ruling in question allowed Amazon to pay substantially less tax than other companies. More specifically, the Commission stated that the tax ruling enabled Amazon to shift the vast majority of its profits from an Amazon group company (Amazon EU) to another company (Amazon Europe Holding Technologies). Amazon EU is subject to taxation in Luxembourg while Amazon Europe Holding Technologies is not. As a limited partnership, only the partners of Amazon Europe Holding Technologies are subject to taxation. These partners are located in the US and have so far deferred their tax liability.

Amazon EU operates Amazon's retail business in Europe. Amazon Europe Holding Technologies does not have any employees or offices, nor does it carry out any business activities. The holding company is an intermediary between Amazon EU and Amazon in the US. It has intellectual property rights and grants its exclusive use of these rights to Amazon EU. Under the tax ruling, Amazon EU paid royalties to Amazon Europe Holding Technologies, as a result of which Amazon EU's taxable profits were substantially reduced.

The Commission decided that the royalty payments did not reflect the economic reality. According to the Commission, the holding company did not perform any activities to justify the level of the royalties received since it was not involved in the management, development or use of its intellectual property. The royalty payment was therefore contrary to the so-called "arm's length principle" under which payments between two companies in the same group should be in line with arrangements that take place under commercial conditions between independent businesses.

The non-confidential version of the decision has not been published yet. Therefore, the exact methodology used to calculate the illegal advantage enjoyed by Amazon is not fully known. The tax authorities in Luxembourg will use this method to determine the exact amount of the State aid that has to be recovered from Amazon.

This article was published in the Competition Law Newsletter of November 2017. Other articles in this newsletter:

  1. General Court annuls UPC/Ziggo merger decision
  2. General Court rules that luxury watchmakers can limit supply of parts to approved repairers
  3. General Court upholds fine for 'gun jumping' EU merger control procedure
  4. Nike can restrict sales via online platforms within its selective distribution system
  5. Dutch Trade and Industry Appeals Tribunal rules on cover pricing
  6. KLM and Amsterdam Schiphol airport offer commitments to reduce competition concerns

Team

Related news

04.01.2019 NL law
Guess what, online branding restrictions are on the Commission's radar

Short Reads - Companies are probably aware of the Commission's eagerness to clamp down on online resale price maintenance and geo-blocking restrictions. The recent fine for vertical restraints by clothing company Guess marks a new dot on the Commission's radar. Restrictions on retailers using a supplier's brand names for online search advertising purposes are just as much a no-go.

Read more

08.01.2019 EU law
Belgium's Energy & Climate Plan - What is the legislative framework for climate policy in Belgium?

Articles - On 19 December 2018, Belgium adopted the first version of the National Energy & Climate Plan, which is a compilation of three individual climate plans from each of Belgium’s regions. It contains specific measures aiming to reduce CO2 emissions in Belgium by 35% by 2030 and to increase the share of renewable energy to 18.3%. The Plan will be submitted to the European Commission and, at the same time, presented to the population, stakeholders, parliaments, and neighboring countries.

Read more

04.01.2019 NL law
Partial fine reduction for Deutsche Telekom and Slovak Telekom for abuse of dominance

Short Reads - The General Court recently clarified that to establish a margin squeeze in the case of positive margins, the Commission needs to prove the exclusionary effects of the dominant company's pricing practices. It also indicated that in cases of refusal to grant access, it is not always necessary to establish the indispensability of the access.

Read more

04.01.2019 NL law
Walking the tightrope between data protection and EU investigations

Short Reads - Two recent publications confirm that it is possible for companies to cooperate with a European Commission investigation and still comply with the data protection rules. It is also possible for the Commission to deviate from certain data protection obligations in the interest of a competition law investigation. The tightrope between data protection and Commission investigations may not be as rigid as initially feared.

Read more

04.01.2019 NL law
General Court dismisses Canal+ appeal against pay-TV commitment decision

Short Reads - The General Court recently dismissed the appeal brought by Canal+ against the decision of the European Commission making the commitments of Paramount legally binding. In 2015, the Commission sent a Statement of Objections alleging that certain geo-blocking clauses in licensing agreements between film studios and pay-TV broadcasters had the object of restricting cross-border competition.

Read more

Our website uses cookies: third party analytics cookies to best adapt our website to your needs & cookies to enable social media functionalities. For more information on the use of cookies, please check our Privacy and Cookie Policy. Please note that you can change your cookie opt-ins at any time via your browser settings.

Privacy – en cookieverklaring