Nike loses fight against EU probe into Dutch tax deal

9:11 am Wednesday, July 14th, 2021

By Foo Yun Chee

BRUSSELS (Reuters) -U.S. sportswear maker Nike on Wednesday lost its fight to stop a probe into its Dutch tax affairs, as Europe’s second-highest court backed an EU investigation opened two years ago.

The EU case was part of a crackdown on multinationals’ sweetheart tax deals with EU countries that Brussels says gives them an unfair advantage, among them Apple’s Irish tax arrangements, and Fiat Chrysler and Amazon’s Luxembourg deals.

The Luxembourg-based General Court dismissed Nike’s challenge against the EU investigation.

“The (European) Commission complied with the procedural rules, and neither failed to fulfil its obligation to state reasons nor made manifest errors of assessment,” the court said.

Judges said the EU executive carried out its provisional assessment of the measures at issue in a diligent and impartial manner and that it did not breach the principle of good administration.

The U.S. sportswear maker had objected to the Commission’s 2019 decision to investigate five tax rulings issued by Dutch authorities from 2006 to 2015 to the company.

The rulings, two of which are still in force, endorsed a method to calculate royalty payments to Nike’s Dutch entities – Nike European Operations Netherlands and Converse Netherlands – for the use of intellectual property.

The Commission said the royalty payments appeared higher than those that independent companies would have agreed between themselves, and may have unduly reduced the Dutch entities’ taxable base, giving Nike a selective advantage amounting to illegal state aid.

Nike argued the EU competition enforcer had jumped the gun by opening a formal investigation instead of continuing its preliminary probe and that it had provided insufficient reasoning to show the case constituted Dutch state aid.

The Commission has a mixed record defending its cases in court, losing cases against Apple, Amazon, but winning ones against Fiat Chrysler and Engie.

The case is T-648/19 Nike European Operations Netherlands et Converse Netherlands v Commission.

(Reporting by Foo Yun Chee Editing by Jason Neely and Mark Potter)