Why do US tech companies honor rulings by the EU when they don't have jurisdiction?

Question

Why don't they just ignore the EU laws such as 'right to be forgotten', or 'cookies laws', or 'privacy', or 'competition', or even collecting VAT. It's not like the EU will block the domain name. Google has done that with China when China ordered it to censor certain web site. Google decided it wasn't worth the trouble to be bullied by the Chinese government so it pulled out and ignored them.

Google's China domain, Google.cn, now redirects to Google.com.hk. The new site reads, "Welcome to the new home of Google China search." The switch means Google is no longer censoring search results for its Chinese visitors. Whether Chinese Internet can actually access Google.com.hk is another matter. It may be blocked by the Chinese government. The move follows months of negotiations and threats between Google (GOOG) and the Chinese government.

Why/when don't/will they do the same thing for the EU?

Answer 1

If the companies ignore the laws of the European Union (EU), then the EU can fine them. The United States (US) may refuse to collect on the fines, but even so, the example company is doing business in the EU.

Amazon.co.uk, Amazon.fr, and Amazon.de collect money in the EU via credit cards. Those credit cards bill EU banks. The EU can of course prevent money from being taken out of EU banks. Similarly, Google, Facebook, etc. sell advertising to EU customers. Again, the EU can block that money from reaching them. And of course, those companies have operations in the EU. The EU could close those operations.

In theory, a company could be 100% US with no EU income and ignore the EU rules. But such a company also has no need to provide service in the EU. Because if it can't sell products or advertising in the EU, why does it need to be there? Transnational corporate advertising? Hint: those companies do business in the EU and are accessible to EU sanctions.

And of course, that's all assuming that the US does not collect on the fines. The US might collect the fine for the EU. After all, it may want to collect a fine against an EU company some day. In fact, there may already be treaties covering that exact issue.

Answer 2

If they have EU-registered subsidiaries and/or operate business towards EU customers, why shouldn't they be subject to EU laws?

And yes, technically the EU can block the domain name, not that this will ever happen as the EU prides itself on the freedom and liberalism provided to all citizens, but nonetheless they still have the power to do so if they ever deemed that necessary. (See Turkey, China, Egypt, Tunisia and other examples of countries mass blocking access to targeted domains.)

Now as far as taxes are concerned, before 2015 tax policy mandated that the provider of a good or service would pay tax in the country registered. This led to a situation where, in order for them to take advantage of this, they fled to tax havens within the EU. For example, Skype and iTunes were registered in Luxembourg; Amazon and Airbnb in Ireland, etc.

However, on Jan. 1, 2015 the EU unified a law on VAT and adopted a norm on the payment of the tax in the place where the service is used, not where it is produced, to deal with the tax policy being abused by multinational corporations.

Epilogue

Even if capital has no nationality, if they want to have access to the European market they must abide by European rules. This is the same reason why companies as big as Google compromise their ideals just to appease oppressive regimes like China's or comply with demands that directly breach end user's privacy like the NSA's Prism program in the US.

Answer 3

Well the first thing is that the EU does have jurisdiction.

These businesses operate in the EU and they are subject to EU law.

The fantasy that they are purely US businesses is just that. In fact they are multi-national businesses with formally registered businesses in many countries. They are required to file tax returns and comply with all the business regulations and laws of the countries they are registered in.

For example, Google has a registered business in Ireland (which makes that an EU business !).

Ignoring a ruling by any court in the registered jurisdiction would, in these cases, could be considered a criminal act by the senior managers and they could, in principle, find themselves being arrested. And these people travel, so eventually they'd go through an airport where an international arrest warrant could stop them in their tracks. Courts take ignoring their rulings seriously and would pursue the matter.

At the very minimum the EU (a huge market) can subject them to fines. The EU could even impose sanctions on these businesses which would be devastating financially.

Answer 4

The EU has obviously jurisdiction in the EU. If they give a company a fine, and all legal possibilities are exhausted, then the EU has the right to collect the fine, any way they can. Of course a company can ignore such a ruling, but that will have negative consequences.

For example, the EU can send bailiffs to all offices of the company in the EU and confiscate anything they have (all office furniture and computers gone), they can empty all their bank accounts, they can order every customer to send any money to the EU and not to that company. Until the fine is paid.

If a company is fined and ignores the ruling by continuing what they were fined for, they can expect a bigger fine the next time. A fine isn't payment, it's an attempt to convince the company to change their behaviour, so not changing their behaviour means a bigger fine.

Answer 5

In the famous case of Google or Facebook, it's because they have an actual presence within the EU. So it's hard to get away from them, since you are located there. For American companies with no presence in the EU, truthfully there's not necessarily any reason they have to abide by the fines imposed by the EU. A lot of people here will refer to vague "international treaties" that they can't name or cite any examples of. Which is why you have to be careful about taking legal advice from random people on the internet. It's a common assumption among Europeans that they'll somehow be able to enforce their laws beyond their actual jurisdiction, but none of them can cite how. And many come up with truly fanciful notions of trade wars and such because America doesn't impose EU fines, which is delusional level thinking truly good for a laugh. Of course, the EU hasn't really gone after purely foreign companies, probably exactly for this problem of enforcement. And once they've publicly failed, then all this silly legal theories go away and they lose a lot of their bark.

Answer 6

To more specifically address the comparison to the example of Google and China, Google, Facebook, Apple, Microsoft, etc. do tons of business in the EU. They could indeed simply pull the plug on their EU operations and ignore any EU rules or court rulings from there on, but that would cost them far, far more in lost business than simply complying with the EU rules.

It's a matter of cost/benefit analysis. The benefit of being able to do business in Europe outweighs the cost of abiding by EU regulations in most cases for the large tech companies. The same might not be true, however, for a small mom-and-pop type business with an internet presence. In that case, they might just choose to ignore, say, GDPR because they don't do enough business in Europe for it to be worth their effort to comply. And even the big companies like Google may determine that it isn't worth accepting censorship in order to do business in China.

Of course, this is true for not only the EU, but also every other market in which they want to continue operating. They have to abide by the local laws if they want to operate there. And, of course, it works just the same in reverse. EU companies that want to do business in the U.S. must abide by U.S. laws and regulations or else face legal penalties in the U.S.