Commission Decision (EU) 2018/859 of 4 October 2017 on State aid SA.38944 (2014/C) (ex 2014/NN) implemented by Luxembourg to Amazon (notified under document C(2017) 6740) (Only the French text is authentic) (Text with EEA relevance)
When the UK left the EU, legislation.gov.uk published EU legislation that had been published by the EU up to IP completion day (31 December 2020 11.00 p.m.). On legislation.gov.uk, these items of legislation are kept up-to-date with any amendments made by the UK since then.
This is the original version as it was originally adopted in the EU.
This legislation may since have been updated - see the latest available (revised) version
THE EUROPEAN COMMISSION,
Having regard to the Treaty on the Functioning of the European Union, and in particular the first subparagraph of Article 108(2) thereof,
Having regard to the Agreement on the European Economic Area, and in particular Article 62(1)(a) thereof,
Having called on interested parties to submit their comments pursuant to the provisions cited above(1) and having regard to their comments,
Whereas:
1. PROCEDURE
2. FACTUAL AND LEGAL BACKGROUND
‘After having made myself acquainted with the letter of october [sic] 31, 2003, directed to me by [Advisor 1] just as with your letter of octobre [sic] 23, 2003 and dealing with your position regarding Luxembourg tax treatment within the framework of your future activities, I am pleased to inform you that I may approve the contents of the two letters.’
Compute and allocate to LuxOpCo the ‘LuxOpCo Return’, which is equal to the lesser of (a) [4-6] % of LuxOpCo's total EU Operating Expenses for the year and (b) total EU Operating Profit attributable to the European Web Sites for such year;
The License Fee shall be equal to EU Operating Profit minus the LuxOpCo Return, provided that the License Fee shall not be less than zero;
The Royalty Rate for the year shall be equal to the License Fee divided by total EU Revenue for the year;
Notwithstanding the foregoing, the amount of the LuxOpCo Return for any year shall not be less than 0,45 % of EU Revenue, nor greater than 0,55 % of EU Revenue;
In the event that the LuxOpCo Return determined under step (1) would be less than 0,45 % of EU Revenues, the LuxOpCo Return shall be adjusted to equal the lesser of (i) 0,45 % of Revenue or EU Operating Profit or (ii) EU Operating Profit;
In the event that the LuxOpCo Return determined under step (1) would be greater than 0,55 % of EU Revenues, the LuxOpCo Return shall be adjusted to equal the lesser of (i) 0,55 % of EU Revenues or (ii) EU Operating Profit.’
‘EU COGS’ means Costs of Goods Sold, computed using US GAAP (Generally Accepted Accounting Principles), attributable to LuxOpCo's operation of the European Web Sites.
‘EU Operating Expense’ means LuxOpCo's total costs, including intercompany expenses, but excluding: EU COGS, the License Fee, currency gains and losses and interest expense, calculated under U.S. GAAP.
‘EU Revenues’ means total net sales revenue earned by LuxOpCo through the EU Web Sites, which shall be equal to the sum of (a) the total sales prices of products sold by LuxOpCo, stated on the invoices which are issued to customers, including revenue attributable to gift wrapping and shipping and handling, less: value added taxes, returns and other allowances, and (b) total services revenue earned by LuxOpCo in connection with the sale of products or services by unrelated parties through the EU Web Sites, less value added taxes.
‘EU Operating Profit’ means EU Revenue minus: EU COGS and EU Operating Expenses.
Calculation in the TP Report, cf. p. 32 of the TP report (Column 1 and 3 added by the Commission)
| (EUR million) | ||||||||
| 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 |
|---|---|---|---|---|---|---|---|---|
| 2005 | 2006 | 2007 | 2008 | 2009 | 2010 | |||
| a | Revenue | 3 154,2 | 4 299,9 | 5 073,9 | 5 987,1 | 7 064,7 | 8 336,3 | |
| b | COGS | 2 446,9 | 3 332,7 | 3 932,6 | 4 640,5 | 5 475,8 | 6 461,4 | |
| c | Gross Profit | a – b | 707,3 | 967,2 | 1 141,3 | 1 346,6 | 1 588,9 | 1 874,9 |
| d | Operating expense | 89,9 | 106,0 | 121,7 | 143,7 | 171,2 | 204,2 | |
| e | Intercompany (co.uk, .de, .fr) | 279,4 | 338,4 | 395,6 | 456,2 | 524,1 | 602,7 | |
| f | LUX Commissionaire expense | 2,8 | 3,4 | 4,1 | 4,9 | 5,9 | 7,0 | |
| g | Operating expense (incl. Intercompany) | d + e + f | 372,1 | 447,8 | 521,4 | 604,8 | 701,2 | 813,9 |
| h | Estimated Operating Net Profit (Loss) before Routine Return | c – g | 335,2 | 519,4 | 619,9 | 741,8 | 887,7 | 1 061,0 |
| i | Routine Return to LuxASE | 0,14 | 0,17 | 0,20 | 0,24 | 0,29 | 0,35 | |
| j | Routine Return to LuxOpCo | [4 – 6] % × g | 16,8 | 20,2 | 23,5 | 27,2 | 31,6 | 36,6 |
| k | Estimated Residual Profit Payable to LuxSCS | h – i – j | 318,3 | 499,1 | 596,2 | 714,3 | 855,8 | 1 024,0 |
| l | Effective Royalty Rate (as % of Revenue) | k/a | 10,1 % | 11,6 % | 11,8 % | 11,9 % | 12,1 % | 12,3 % |
Calculation of LuxOpCo's taxable base and royalty payments 2006-2013
| (EUR million) | ||||||||
| Luxembourgish fiscal unity group | 2006 | 2007 | 2008 | 2009 | 2010 | 2011 | 2012 | 2013 |
|---|---|---|---|---|---|---|---|---|
| Total revenue | 1 979,4 | 3 545,7 | 4 298,6 | 5 605,4 | 7 628,8 | 10 086,3 | 13 312,1 | [15 000 – 15 500] |
| Net COGS | 1 610,8 | 2 828,3 | 3 406,1 | 4 421,6 | 6 084,4 | 8 078,0 | 10 486,6 | [11 500 – 12 000] |
| Total operating expense | 262,5 | 476,8 | 530,0 | 637,6 | 918,3 | 1 461,7 | 2 252,9 | [3 000 – 3 500] |
| Thereof | ||||||||
| Expenses applicable to mark-up | 262,5 | 439,9 | 493,6 | 597,0 | 801,9 | 1 313,1 | 2 041,7 | [2 500 – 3 000] |
| Thereof | ||||||||
| LuxOpCo - OpEx | 78,6 | 162,6 | 203,6 | 258,4 | 317,7 | 483,1 | 662,7 | [800 – 900] |
| LuxOpCo - Intercompany | 183,8 | 277,3 | 290,0 | 338,6 | 484,1 | 830,1 | 1 379,0 | [1 500 – 2 000] |
| Expenses excluded from mark-up (Mngt and RSU) | 0,0 | 36,9 | 36,4 | 40,6 | 116,4 | 148,5 | 211,2 | [200 – 300] |
| Resulting operating profit | 106,1 | 240,5 | 362,6 | 546,2 | 626,1 | 546,6 | 572,7 | [600 – 700] |
| Estimated Total Return to Lux Fiscal Unity Group at [4-6] % of adjusted OpEx | 11,8 | 19,8 | 22,2 | 26,9 | 36,1 | 59,1 | 91,9 | [100 – 200] |
| Ceiling/floor analysis | ||||||||
| Profit ceiling (0,55 % of revenue) | 10,9 | 19,5 | 23,6 | 30,8 | 42,0 | 55,5 | 73,2 | [80 – 90] |
| Profit floor (0,45 % of revenue) | 8,9 | 16,0 | 19,3 | 25,2 | 34,3 | 45,4 | 59,9 | [60 – 70] |
| Luxembourg consolidated Profit - per Ceiling/Floor and Return | 10,9 | 19,5 | 22,2 | 26,9 | 36,1 | 55,5 | 73,2 | [80 – 90] |
| Royalty payment (Lux fiscal unity group to LuxSCS) | 95,2 | 221,0 | 340,4 | 519,3 | 590,0 | 491,1 | 499,4 | [500 – 600] |
Software platform: the software code developed by Amazon to operate its web sites consists of complex software tools that run the various features of the websites, such as search and navigation, order processing and personalisation. The software tools at the root of the platform form an integrated system that is constantly being improved, reinforced and modified. The main features include operating speed, extent of functions and flexibility in the response to users' needs.
Appearance of the website: the design creates a unique ‘presentation’ of the website.
Catalogue software: the catalogue consists of all the information on the products sold by Amazon on its websites. Amazon's catalogue is notable for the extent of the information on products that it can obtain through querying other services, such as availability and pricing data.
Search and navigation function software: the software tools supporting the search and navigation functions of the websites allow the large quantity of information contained in the product catalogues to be flexibly and logically organised and sorted. The site navigation developers use these tools to organise the data so that they can maximise the likelihood that customers will find what they are looking for.
Logistics software: the logistics process uses software developed by Amazon to manage the inventory, supply chain, logistics and restocking.
Order processing software: order processing uses software developed by Amazon to perform certain functions, in particular communication with Amazon order management centres to confirm product availability, validate dispatch, estimate the delivery date, and communicate gift packaging requirements and other customer preferences.
Customer service software: the customer service representatives use software developed by Amazon to monitor customer orders and respond fully and quickly to the wide variety of these.
Personalisation functions software: Amazon has developed, and is continuing to develop software tools that enable the Amazon databases to store, organise and retrieve a large amount of data on the preferences and purchase history of individual customers. This function results in a better experience for users and is more likely to generate repeat purchases.
[…]
LuxOpCo financial information for 2006-2013
| (EUR million) | ||||||||
| LuxOpCo profit and loss | 2006 | 2007 | 2008 | 2009 | 2010 | 2011 | 2012 | 2013 |
|---|---|---|---|---|---|---|---|---|
| Turnover | n.a. | n.a. | n.a. | n.a. | n.a. | 9 130,1 | 11 892,9 | [13 500 – 14 000] |
| COGS | n.a. | n.a. | n.a. | n.a. | n.a. | 7 078,4 | 9 171,9 | [10 000 – 10 500] |
| Net turnover | 1 930,1 | 3 426,7 | 4 031,6 | 5 191,1 | 7 042,1 | 2 051,7 | 2 721,0 | [3 000 – 3 500] |
| Staff costs | 2,2 | 5,1 | 7,5 | 11,4 | 14,0 | 23,4 | 40,7 | [60 – 70] |
| Value adjustments on assets | 4,0 | 14,9 | 16,1 | 15,9 | 31,8 | 81,8 | 254,4 | [200 – 300] |
| Other operating income | 91,3 | 128,6 | 211,7 | 286,6 | 451,0 | 724,6 | 1 183,1 | [1 500 – 2 000] |
| Thereof | ||||||||
| Royalty received from ASE | 78,6 | 126,1 | 196,2 | 285,6 | 449,8 | 694,3 | 1 072,3 | [1 500 – 2 000] |
| Royalty received from AMEU | 2,5 | 7,5 | 0,0 | 0,0 | 21,9 | 95,9 | [100 – 200] | |
| Other operating (external) charges | 1 979,5 | 3 546,8 | 4 188,5 | 5 416,5 | 7 418,2 | 2 647,3 | 3 726,2 | [4 500 – 5 000] |
| Thereof | ||||||||
| COGS | 2 608,4 | 3 058,4 | 3 952,6 | 5 458,1 | ||||
| Royalty paid to LuxSCS | 95,2 | 257,9 | 341,4 | 519,3 | 590,0 | 491,1 | 499,4 | [500 – 600] |
| Interest receivable and similar income | 10,9 | 22,7 | 29,7 | 19,2 | 23,8 | 65,4 | 131,1 | [40 – 50] |
| Interest payable and similar charges | 30,4 | 16,5 | 35,5 | 38,3 | 33,1 | 60,5 | 80,0 | [70-80] |
| (19,5) | 6,2 | (5,7) | (19,1) | (9,3) | 4,9 | 51,1 | [30 – 40] | |
| Tax on profit and similar charges | 4,6 | (1,6) | 6,7 | 4,2 | 5,5 | 8,2 | 2,2 | [0 – 10] |
| Profit (loss) for the financial year | 11,6 | (3,7) | 18,8 | 10,6 | 14,4 | 20,4 | (68,3) | [20 – 30] |
| LuxOpCo balance sheet | 2006 | 2007 | 2008 | 2009 | 2010 | 2011 | 2012 | 2013 |
|---|---|---|---|---|---|---|---|---|
| Assets | ||||||||
| Fixed assets | 190 | 209 | 275 | 304 | 547 | 915 | 1 361 | [1 500 – 2 000] |
| Intangible fixed assets | 0 | 0 | 0 | 0 | 0 | 2 | 121 | [100 – 200] |
| Tangible fixed assets | 6 | 5 | 1 | 1 | 3 | 5 | 8 | [0-10] |
| Financial fixed assets | 184 | 203 | 274 | 303 | 544 | 908 | 1 232 | [1 500-2 000] |
| Current assets | 887 | 1 171 | 1 518 | 2 396 | 3 255 | 4 113 | 4 851 | [5 000-5 500] |
| Inventories | 185 | 227 | 245 | 384 | 591 | 990 | 1 350 | [1 500-2 000] |
| Debtors | 152 | 255 | 266 | 320 | 511 | 798 | 916 | [1 000 – 1 500] |
| Transferable securities | 99 | 112 | 376 | 1 049 | 1 348 | 1 182 | 924 | [800-900] |
| Cash at bank, cash in postal cheque account, cheques and cash in hand | 451 | 577 | 632 | 644 | 805 | 1 143 | 1 661 | [1 500-2 000] |
| Prepayments | 0 | 0 | 1 | 1 | 5 | 3 | 16 | [10-20] |
| Total assets | 1 077 | 1 380 | 1 794 | 2 702 | 3 807 | 5 031 | 6 228 | [7 000 – 7 500] |
| Liabilities | ||||||||
| Capital and reserves | 35 | 41 | 73 | 89 | 117 | 185 | 109 | [100 – 200] |
| Non-subordinated debt | 1 011 | 1 302 | 1 676 | 2 521 | 3 553 | 4 636 | 5 817 | [6 500 – 7 000] |
| Trade creditors | 397 | 597 | 779 | 1 136 | 1 661 | 2 187 | 2 910 | [3 000 – 3 500] |
| Amounts owed to affiliated companies | 550 | 632 | 833 | 1 285 | 1 712 | 2 109 | 2 460 | [2 500-3 000] |
| Tax and social security debts | 2 | 6 | 5 | 3 | 1 | 116 | 121 | [100-200] |
| Other creditors and accruals | 61 | 68 | 59 | 96 | 179 | 224 | 327 | [100-200] |
| Deferred income | 31 | 37 | 46 | 92 | 137 | 210 | 301 | [300-400] |
| Total liabilities | 1 077 | 1 380 | 1 794 | 2 702 | 3 807 | 5 031 | 6 228 | [7 000-7 500] |
Value adjustments and provisions in respect of the current assets of LuxOpCo
| (EUR thousand) | |||||||||
| 2006 | 2007 | 2008 | 2009 | 2010 | 2011 | 2012 | 2013 | 2014 | |
|---|---|---|---|---|---|---|---|---|---|
| Value adjustments in respect of the current assets | n.a. | 8 043 | 12 556 | 15 343 | 170 176 | 54 908 | 80 858 | [70 000 – 80 000] | [40 000 – 50 000] |
| Thereof: | |||||||||
| Inventories | 12 694 | 45 664 | 68 251 | [60 000 – 70 000] | |||||
| Trade debtors | 4 382 | 9 244 | 12 607 | [10 000 – 20 000] | |||||
| Provisions for value adjustments: | |||||||||
| For inventory | 16 525 | 19 340 | 25 127 | 35 482 | 48 320 | 91 060 | 152 543 | [200 000 – 300 000] | [200 000 – 300 000] |
| Trade debtors – doubtful accounts | 6 022 | 11 019 | 13 739 | 9 019 | 11 739 | 1 653 | 16 042 | [10 000 – 20 000] | [20 000 – 30 000] |
Components of LuxOpCo's turnover
| (EUR million) | ||||||||
| 2006 | 2007 | 2008 | 2009 | 2010 | 2011 | 2012 | 2013 | |
|---|---|---|---|---|---|---|---|---|
| Net sales proceeds | 1 798,9 | 3 152,7 | 3 849,4 | 5 019,6 | 6 751,5 | 8 741,0 | 11 166,3 | [12 000 – 12 500] |
| Marketplace | 71,0 | 158,1 | 216,2 | 302,5 | 467,0 | 721,9 | 1 105,8 | [1 500 – 2 000] |
| Digital | 0,0 | 23,2 | 28,7 | 26,6 | 58,9 | 146,2 | 369,5 | [500-600] |
| Fulfillment by Amazon | 0,0 | 0,1 | 0,4 | 4,2 | 53,6 | 80,5 | 175,6 | [400-500] |
| Prime subscription | 0,0 | 0,4 | 5,8 | 25,8 | 60,4 | 77,3 | 113,2 | [100-200] |
| Transportation costs recharge | 74,8 | 135,1 | 125,9 | 124,9 | 117,8 | 160,2 | 208,9 | [100 – 200] |
| Gift packaging | 2,9 | 4,4 | 4,6 | 5,4 | 11,7 | 14,6 | 24,4 | [20-30] |
| Ancilliary revenues | 30,1 | 71,7 | 67,6 | 96,4 | 107,9 | 144,5 | 148,5 | [100-200] |
| 1 977,7 | 3 545,7 | 4 298,7 | 5 605,4 | 7 628,8 | 10 086,3 | 13 312,1 | [15 000 – 15 500] | |
Detailed break-down of LuxOpCo's operating expenses
| (EUR million) | ||||||||
| LuxOpCo external operating charges | 2006 | 2007 | 2008 | 2009 | 2010 | 2011 | 2012 | 2013 |
|---|---|---|---|---|---|---|---|---|
| Building costs | 1,2 | 2,4 | 4,3 | 3,6 | 3,9 | 8,0 | 8,9 | [10-20] |
| COGS | 1 486,6 | 2 608,4 | 3 058,4 | 3 952,6 | 5 458,1 | 0,0 | 0,0 | [20-30] |
| Consulting, legal and other | 1,5 | 4,3 | 5,6 | 4,9 | 8,8 | 16,2 | 21,2 | [30 - 40] |
| Employee | 2,5 | 2,4 | 3,2 | 3,3 | 4,7 | 11,7 | 25,2 | [20-30] |
| Fulfillment | 3,1 | 6,0 | 8,1 | 10,1 | 15,2 | 25,2 | 42,9 | [60-70] |
| Intercompany | 267,2 | 544,3 | 665,3 | 870,6 | 1 127,4 | 976,3 | 1 591,3 | [2 000-2 500] |
| Marketing | 47,3 | 63,7 | 85,6 | 123,9 | 155,0 | 259,5 | 386,6 | [400-500] |
| Others | 0,6 | – 0,3 | 11,3 | 2,0 | – 7,4 | – 4,6 | – 6,6 | – [0 – 10] |
| Receivables and Credit Card fees | 24,7 | 46,0 | 47,5 | 49,0 | 60,4 | 57,6 | 55,9 | [60-70] |
| Royalty | 0,0 | 0,3 | 2,0 | 29,9 | 66,1 | 0,0 | 0,5 | [0-10] |
| Transportation | 145,0 | 269,2 | 297,2 | 366,6 | 525,9 | 794,3 | 1 065,9 | [1 000-1 500] |
| Total | 1 979,5 | 3 546,8 | 4 188,5 | 5 416,5 | 7 418,2 | 2 144,1 | 3 191,8 | [4 000 – 4 500] |
Detailed overview of LuxOpCo's marketing expenses
| (EUR million) | ||||||||
| LuxOpCo marketing costs | 2006 | 2007 | 2008 | 2009 | 2010 | 2011 | 2012 | 2013 |
|---|---|---|---|---|---|---|---|---|
| Ad placement | 0,0 | 0,9 | – 0,1 | 0,0 | 0,0 | 19,7 | 57,5 | [60-70] |
| Associates | 29,7 | 42,9 | 57,1 | 71,0 | 77,7 | 101,8 | 136,1 | [100-200] |
| Coop vendor | – 0,4 | 0,0 | 0,0 | – 2,3 | – 4,5 | – 8,9 | – 14,4 | – [20 – 30] |
| DVDs Disposal | 3,8 | 0,5 | – 0,1 | 0,0 | 0,0 | 0,0 | 0,0 | [0 – 10] |
| DVDs License fees | 0,4 | 0,2 | 0,0 | 0,0 | 0,0 | 0,0 | 0,0 | [0 – 10] |
| DVDs Taxes | 0,3 | 0,1 | 0,0 | 0,0 | 0,0 | 0,0 | [0 – 10] | |
| Editorial | 1,1 | 1,1 | 1,1 | 1,4 | 1,2 | 1,4 | 2,1 | [0-10] |
| Free sample | 0,0 | 0,0 | 0,0 | 0,0 | 0,0 | 0,0 | [0 – 10] | |
| Online adds | 0,0 | 0,0 | 0,1 | 0,2 | 2,6 | 9,4 | [20-30] | |
| Promotions | 0,1 | 0,2 | 0,1 | 0,2 | 0,2 | 10,2 | 18,6 | [10-20] |
| Research | 0,0 | 0,2 | 0,5 | 0,5 | 0,7 | 2,3 | 0,7 | [0 – 10] |
| Sponsored links | 12,6 | 17,2 | 26,9 | 52,9 | 79,5 | 130,4 | 176,2 | [200-300] |
| Synd Ad expense | 0,0 | 0,0 | 0,0 | 0,0 | 0,0 | 0,3 | [0-10] | |
| Syndicated store | 0,0 | 0,0 | 0,0 | 0,0 | 0,0 | 0,0 | [0 – 10] | |
| Others | 0,0 | 0,0 | 0,0 | 0,0 | 0,0 | 0,0 | 0,0 | [0 – 10] |
| Total | 47,3 | 63,7 | 85,6 | 123,9 | 155,0 | 259,5 | 386,6 | [400-500] |
Break-down of the Intercompany costs
| (EUR million) | ||||||||
| 2006 | 2007 | 2008 | 2009 | 2010 | 2011 | 2012 | 2013 | |
|---|---|---|---|---|---|---|---|---|
| Advertising | 0,1 | 0,1 | – 0,1 | – 0,9 | 25,8 | 39,6 | [30-40] | |
| Application Development Expense | 1,4 | [0-10] | ||||||
| Customer Service | 10,9 | 18,5 | 17,7 | 22,2 | 54,7 | 47,7 | 74,6 | [100-200] |
| Data Center | 14,0 | 24,4 | 27,8 | 27,7 | 35,1 | 67,7 | 107,4 | [100-200] |
| Fulfillment Center | 106,6 | 175,0 | 188,3 | 228,1 | 313,1 | 576,3 | 973,0 | [1 000-1 500] |
| Marketing | 27,9 | 50,1 | 24,2 | 28,3 | ||||
| Operations | 0,1 | 0,0 | 0,0 | 0,2 | 0,2 | 0,2 | 0,2 | [0 – 10] |
| Shared services center | 2,0 | 6,2 | [10-20] | |||||
| Support Service | 0,2 | – 0,2 | 31,9 | 32,1 | 80,9 | 107,9 | 172,3 | [200-300] |
| 159,8 | 268,0 | 289,9 | 338,4 | 483,1 | 827,6 | 1 374,7 | [1 500 – 2 000] | |
LuxSCS balance sheet and profit and loss
| (EUR thousand) | |||||||||
| LuxSCS balance sheet | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| 2005 | 2006 | 2007 | 2008 | 2009 | 2010 | 2011 | 2012 | 2013 | |
| CAPITAL | |||||||||
| Subscribed capital | 1 | 4 | 4 | 4 | 4 | 4 | 4 | 4 | [0-10] |
| Share premium | 116 204 | 417 587 | 417 587 | 417 587 | 417 587 | 417 587 | 464 363 | 549 035 | [500 000-600 000] |
| Revaluation reserve | 690 | [400-500] | |||||||
| Profit (loss) brought forward and of the financial year | – 149 362 | – 191 242 | – 26 127 | 275 480 | 684 473 | 1 125 172 | 1 426 951 | 1 544 845 | [1 500 000 – 2 000 000] |
| CREDITORS | |||||||||
| Amounts owed to affiliated companies | 33 185 | 171 406 | 25 525 | 26 292 | 28 013 | 37 549 | 65 931 | 138 006 | [100 000-200 000] |
| Other creditors and accruals | 0 | 13 540 | 49 | 1 095 | 208 | 629 | 327 | 515 | [1 000-10 000] |
| Total liabilities | 28 | 411 294 | 417 037 | 720 457 | 1 130 285 | 1 580 941 | 1 957 577 | 2 233 094 | [2 000 000-2 500 000] |
| ASSETS | |||||||||
| Shares in affiliated undertakings | 25 | 24 184 | 24 184 | 24 184 | 25 909 | 42 176 | 104 652 | 130 152 | [100 000-200 000] |
| Intangible assets (acquired) and goodwill | 18 978 | 116 101 | [90 000-100 000] | ||||||
| Amounts owed by affiliated companies | 0 | 387 053 | 392 810 | 696 227 | 1 104 283 | 1 538 640 | 1 833 863 | 1 986 763 | [2 000 000-2 500 000] |
| Other debtors and cash | 3 | 57 | 42 | 47 | 93 | 125 | 84 | 79 | [300-400] |
| Total assets | 28 | 411 294 | 417 037 | 720 457 | 1 130 285 | 1 580 941 | 1 957 577 | 2 233 094 | [2 000 000-2 500 000] |
| (EUR thousand) | |||||||||
| LuxSCS Profit and loss | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| 2005 | 2006 | 2007 | 2008 | 2009 | 2010 | 2011 | 2012 | 2013 | |
| INCOME | |||||||||
| Other operating income | 0 | 78 598 | 274 558 | 390 593 | 519 316 | 582 731 | 491 107 | 493 317 | [500 000 – 600 000] |
| Interest receivable and similar income | 681 | 25 178 | 27 312 | 30 035 | 32 373 | 28 282 | 44 064 | 56 026 | [40 000 – 50 000] |
| CHARGES | |||||||||
| Other charges and other operating charges | 147 259 | 135 211 | 132 461 | 114 338 | 105 133 | 166 143 | 230 355 | 409 977 | [400 000 – 500 000] |
| Value adjustments | 1 826 | 18 557 | [20 000 – 30 000] | ||||||
| Interest payable and similar charges | 524 | 10 445 | 4 294 | 4 683 | 2 363 | 4 171 | 1 211 | 2 915 | [600 – 700] |
| Profit of the financial year | – 147 101 | – 41 881 | 165 115 | 301 607 | 444 193 | 440 699 | 301 779 | 117 894 | [100 000 – 200 000] |
Other charges and other operating charges incurred by LuxSCS 2006-2013
| (EUR thousand) | |||||||||
| 2006 | 2007 | 2008 | 2009 | 2010 | 2011 | 2012 | 2013 | ||
|---|---|---|---|---|---|---|---|---|---|
| Description | Counterparty | ||||||||
| Accounting fees | External | 2 | 3 | ||||||
| Bank charges | External | 1 | 2 | 1 | 1 | 1 | 0 | 0 | [0-10] |
| Courier charges | External | 0 | |||||||
| Domain licenses | External | 285 | |||||||
| Legal fees - general corporate | External | 111 | 232 | 537 | 617 | 875 | |||
| Outside Services | External | 0 | |||||||
| Miscellaneous gains/losses | Various | 0 | 0 | – 2 | 0 | ||||
| Intercompany - sale of inventory | Amazon.de GmbH | 1 468 | |||||||
| LuxOpCo | 2 205 | ||||||||
| Amazon.co.uk Ltd | 522 | ||||||||
| Buy-in payments | Amazon Technologies , & A9.com, & Audible | 68 271 | 42 274 | 27 209 | 9 439 | 39 957 | 26 803 | 56 975 | [1 000 – 10 000] |
| Cost sharing agreement | Amazon Technologies , & A9.com, & Audible | 62 630 | 89 956 | 86 593 | 95 076 | 12 561 | 202 286 | 351 497 | [400 000 – 500 000] |
Buy-In Payments
| (in millions) | ||||||
| 2006 | 2007 | 2008 | 2009 | 2010 | 2011 | |
|---|---|---|---|---|---|---|
| Buy-In Payment (in USD) | 82,68 | 54,95 | 28,26 | 11,04 | 2,28 | 1,08 |
| Buy-In Payment (EUR equivalent) | 68,34 | 42,27 | 19,15 | 8,45 | 2,40 | 0,79 |
CSA Payments by LuxSCS
| (EUR million) | |||||||||
| 2006 | 2007 | 2008 | 2009 | 2010 | 2011 | 2012 | 2013 | Total | |
|---|---|---|---|---|---|---|---|---|---|
| CSA Payment by LuxSCS | 63 | 90 | 87 | 95 | 125 | 202 | 351 | [400-500] | [1 000-1 500] |
Functions and risks of LuxSCS in connection with the CSA
| a The ‘European Territory’ is defined in the CSA as ‘all the countries included within the meaning of the term ‘European Country’ as defined in Section 1.12 hereof.’ In section 1.12, ‘European Country’ is defined as ‘(a) the economic, scientific, and political organization known as the European Union consisting, as of the Effective Date, of Belgium, France, Italy, Luxembourg, Netherlands, Germany, Denmark, Greece, Ireland, United Kingdom, Spain, Portugal, Austria, Finland, Sweden, Cyprus, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia, and Slovenia, and including any and all other countries that may become members of such organization during the Term, and (b) any countries listed as ‘Applicant countries’ or ‘Other European countries’ on the Web page located at http://europa.eu.intlabc/governments/indexen.htm#, or any successors thereto or replacements thereof’. | ||
| b The term ‘Research Program’ appears not to have been defined in the CSA. This term is understood to also refer to the Development Program. | ||
| No. | Functions of LuxSCS | Risks to be assumed by LuxSCS |
|---|---|---|
| 1 | [LuxSCS] shall conduct Development Program either directly or indirectly through its subsidiaries, within the European Territory and share the results of its activities with [A9 and ATI]. | All business risks relating to European Territory, including, but not limited to, credit risk, collections risk, market risk, risk of loss, risks relating to maintaining a workforce capable of efficiently and timely selling goods and providing services in the European Territory. |
| 2 | [LuxSCS] shall perform sales and marketing activities within the European Tenitorya. | Risk associated with the Development Program risks, including risk of failure or untimely development of products or provision of services for the European Territory. |
| 3 | [LuxSCS] shall perform strategic planning activities on customer needs and product requirements relating to Development Program within its Territory. | Products related market risks within the European Territory and impact on success of Research Programb including:
|
| 4 | [LuxSCS] shall perform budgeting and planning activity associated with the Development Program. | Legal and regulatory risks associated with operating an on-line business. |
| 5 | [LuxSCS] shall manage strategic acquisitions of technologies that fall within the scope of the Development Program. | Brand development and brand recognition risks within the European Territory. |
| 6 | [LuxSCS] shall perform quality control and assurance functions. | Key personnel risks, quality control risks and product safety and liability risks (including warranty and liability risks) within the European Territory. |
| 7 | [LuxSCS] shall sell select, hire, and supervise employees, contractors and sub-contractors to perform any of the above activities. | Acquisition risks, including the ability to timely and successfully incorporate any acquired technology successfully. |
Minutes of SCS from 2004 -2013
| Date | Type of decision | Summary | |
|---|---|---|---|
| 07/06/2004 | Written resolution of the sole manager of LuxSCS ([…]as proxyholder) | Approving all necessary actions as regard the post-formation steps; Ratification of the opening of the bank account with [bank]; Approving entering into a domiciliation agreement with [service company]; Incorporation of LuxOpCo. | |
| 14/01/2005 | Written resolution of the sole manager of LuxSCS ([…] as vice President) | Ratification of two cost sharing agreements and a buy-in agreement; Adopting amendments to LuxSCS' articles of association, in order to resolve the adoption of certain specific rights of the shares on dividends and other distributions, and the adoption of specific share premium accounts; Increase of LuxSCS' share capital by way of an all assets and liabilities contribution to be undertaken by ACI Holdings Limited, a Gibraltar company (‘ACI’); Approving the appointment of […] as additional manager of LuxOpCo and an amendment of the corporate object of LuxOpCo; Assigning a note receivable to Amazon.com International Sales, Inc.; Granting a loan to LuxOpCo. | |
| 17/01/2005 | Minutes of extraordinary General Meeting ([…] as president, […] as secretary, […] as scrutineer) | Adoption of new articles of association, in order to resolve the adoption of some specific rights of the shares on dividends and other distributions; Increase of share capital | |
| 07/06/2005 | Written resolution of the sole manager of LuxSCS ([…] as vice President) | Transfer of the registered address of LuxSCS. | |
| 22/06/2005 | Minutes of General Meeting ([…] as president, […] as secretary, […] as scrutineer) | Waiver of notice of rights; Approval of the annual accounts as of 31 December 2004; Discharge of the sole manager, Amazon Europe Holding, Inc. for the financial year ending on 31 December 2004. | |
| 22/06/2005 | Written resolution of the sole manager of LuxSCS ([…] as vice president) | Settlement of LuxSCS's accounts as of 31 December 2004 and resolution to submit such accounts to the LuxSCS's shareholders for approval; Discharge of the sole manager of LuxSCS for the accounting year ending on 31 December 2004. | |
| 06/02/2006 | Written resolution of the sole manager of LuxSCS ([…] acting on behalf) | Adopting an increase of the share capital of LuxSCS by a contribution in kind of shares held by Amazon.com, Inc. in Amazon.fr Holdings SAS having a value of USD 1 017 240 in consideration of limited shares of LuxSCS; Approving the entering into one or more share transfer agreements in order to acquire 100 % off the shares of Amazon.co.uk Ltd and Amazon.de GmbH held by Amazon.com, Inc. and 95,8 % of the shares of Amazon.fr Holdings SAS held by Amazon.com, Inc., in consideration of a promissory note in principal amount of USD 194 672 760,0; Adoption of increase of the share capital by way of an all assets and liabilities contribution to be undertaken by ACI Holdings in consideration of limited shares of LuxSCS. | |
| 06/02/2006 | Minutes of the extraordinary General Meeting of LuxSCS ([…] as president, […] as secretary, […] as scrutineer) | Increase of the share capital of LuxSCS; Resolution to accept the subscription and payment by Amazon.com, Inc. of new limited shares by way of a contribution in kind; Increase of the share capital of LuxSCS; Subscription and payment by ACI Holdings Limited of new limited shares by way of a contribution in kind; Cancellation of 900 limited shares in LuxSCS; New composition of the shareholding of LuxSCS. | |
| 07/02/2006 | Written resolution of the sole manager of LuxSCS ([…] acting on behalf) | Approving the entering into share transfer agreement in order to sell 100 % of the shares of Amazon.de GmbH and 8 724 191 of the shares (representing 93,1471 %) of Amazon.co.uk Ltd, in consideration of a note amounting to EUR 136 828 362; Proposal to contribute 6,8529 % of the shares of Amazon.co.uk Ltd and 100 % of the shares of amazon.fr Holdings SAS to LuxOpCo,; Granting a loan to LuxOpCo. | |
| 18/04/2006 | Written resolution of the sole manager of LuxSCS ([…] acting on behalf) | Resolution to split into three different promissory notes a promissory note issued by the LuxSCS on February 6, 2006 in the principal amount of USD 194 672 760 to the benefit of Amazon.com. Inc.; Increase the share capital of LuxSCS by a contribution in kind to LuxSCS by ACI of the UK Note and the DE Note in consideration of the issuance of limited shares of LuxSCS. | |
| 19/04/2006 | Minutes of the extraordinary General Meeting of LuxSCS ([…] as president, […] as secretary, […] as scrutineer) | Increase of the share capital of LuxSCS; Resolution to accept subscription and payment by Amazon.com, Inc. of new limited shares by way of contribution in kind; New composition of LuxSCS; Amendment of the articles of association. | |
| 28/04/2006 | Written resolution of the sole manager of LuxSCS ([…] as vice president) | Acknowledgement of the resignation of […]as manager of LuxOpCo and of the appointment of […] and […] as managers of LuxOpCo; Adopting an increase of the share capital of [LuxSCS] by way of an all assets and liabilities contribution to be undertaken by ACI Holdings Limited, a Gibraltar company (‘ACIH’) in consideration of limited shares of LuxSCS; Approving the assignment of certain IP rights from Amazon.co.uk Ltd, Amazon.fr Holdings SAS and Amazon.de GmbH; Approving the acquisition of the EU Retail Business of Amazon.com Int'l Sales, Inc., and the subsequent transfer of the same to LuxOpCo; Approving intellectual property license agreements with LuxOpCo; Merger of certain limited shareholders of LuxSCS; Loan to LuxOpCo. | |
| 28/04/2006 | Minutes of the extraordinary General Meeting of LuxSCS ([…] as president, […] as secretary, […] as scrutineer) | Increase of share capital; Resolution to accept subscription and payment by ACI Holdings Limited of all the 3 750 limited shares; Cancellation of 1 993 shares; New composition of the shareholding of LuxSCS; Amendments of the articles of Association. | |
| 09/05/2006 | Minutes of the General Meeting of LuxSCS ([…] as president, […] as secretary, […] as scrutineer) | Waiver of notice rights; Amendment to the articles of association of LuxSCS further to the merger of Amazon.com Int'l Marketplace, Inc. into Amazon Int'l Sales. | |
| 27/06/2006 | Minutes of the extraordinary General Meeting of LuxSCS ([…] as president, […] as secretary, […] as scrutineer) | Decrease of the personal share premium account of ACI Holdings limited further to the final valuation of the 28 April 2006 contribution. | |
| 22/05/2007 | Written resolution of the shareholders of LuxSCS ([…] as vice President, […] as vice president, […] as treasurer and director) | Settlement of LuxSCS' annual accounts as of 31 December 2005 and resolution to submit the annual accounts to the sole shareholder of LuxSCS and to discharge the sole manager of LuxSCS for the accounting year ending on 31 December 2005. | |
| 22/05/2007 | Written resolution of the shareholders of LuxSCS ([…] as vice President, […] as vice president, […] as vice president, treasurer and director) | Approval of the annual accounts as of 31 December 2005 and allocation of the result; Discharge of the managers for the financial year ending on 31 December 2005. | |
| 25/04/2008 | Written resolution of the sole manager of LuxSCS ([…] as vice president) | Settlement of LuxSCS's annual accounts as of 31 December 2006 and resolution to submit such annual accounts to LuxSCS's shareholders for approval; Resolution to discharge to the sole manager of LuxSCS for the accounting year ending on 31 December 2006. | |
| 25/04/2008 | Written resolution of the shareholders of LuxSCS ([…] as vice President, […] as vice president, […] as vice president, treasurer and director) | Approval of the annual accounts as of 31 December 2006 and allocation of the result and resolution to submit the annual accounts to the shareholders of LuxSCS; Discharge of the sole manager of the manager for the financial year ending on 31 December 2006. | |
| 18/06/2008 | Written resolution of the sole manager of LuxSCS ([…] as vice President) | Approval of the annual accounts as of 31 December 2006 of LuxOpCo and amendment and adoption of its signatory delegation policies; Approval of the annual accounts as of 31 December 2006 of Amazon Eurasia Holdings Sarl (‘AEH’) and amendment and adoption of its signatory delegation policies. | |
| 23/03/2009 | Written resolution of the sole manager of LuxSCS ([…] as vice president) | Resolution to contribute an aggregate amount of EUR 25 000 to AEH in consideration for the issuance of new shares by AEH. | |
| 25/06/2009 | Written resolution of the shareholders of LuxSCS ([…] as vice president, […] as president, […] as vice president, treasurer and director) | Approval of the annual accounts as of 31 December 2008 and allocation of the result; Discharge of the sole manager of the manager for the financial year ending on 31 December 2008. | |
| 25/06/2009 | Written resolution of the sole manager of LuxSCS ([…] as president) | Settlement of LuxSCS's annual accounts as of 31 December 2009 and resolution to submit such annual accounts to LuxSCS's shareholders for approval; Proposal to give discharge to the sole manager of LuxSCS for the accounting year ending on 31 December 2008; Approval of the annual accounts as of 31 December 2008 of LuxOpCo; Approval of the annual accounts as of 31 December 2008 of AEH; Proposal to increase the share capital of AEH by a contribution in cash. | |
| 06/07/2009 | Written resolution of the sole manager of LuxSCS ([…] as president, […] as vice president, […] as vice president, treasurer and director) | Approval of the annual accounts as of 31 December 2008 and allocation of the result; Discharge of the sole manager of the manager for the financial year ending on 31 December 2008. | |
| 31/08/2009 | Written resolution of the sole manager of LuxSCS ([…] as president) | Convening of an extraordinary general meeting of LuxSCS regarding from 1 September 2009 regarding: Waiver of notice rights; Amendment to the articles of association of LuxSCS further to the liquidation of ACI Holdings Limited and the related transfer of its 3 750 limited shares held in LuxSCS to its parent company Amazon.com Int'l Sales, Inc. | |
| 11/09/2009 | Minutes of the General Meeting of LuxSCS ([…] as president, […] as secretary, […] as scrutineer) | Waiver of notice rights; Amendment to the articles of association of LuxSCS further to the liquidation of ACI Holdings Limited and the related transfer of its 3 750 limited shares held in LuxSCS to its parent company Amazon.com Int'l Sales, Inc. | |
| 07/12/2009 | Written resolution of the sole manager of LuxSCS ([…] as president) | Resolution on increase of the share capital of AEH by a contribution in cash. | |
| 22/12/2009 | Written resolution of the shareholders of LuxSCS ([…] as president, […] as vice president, […] as vice president and treasurer) | Approval of the distribution of interim dividends of LuxSCS. | |
| 22/12/2009 | Written resolution of the sole manager of LuxSCS ([…] as president) | Distribution of an interim dividend to the Shareholders of LuxSCS. | |
| 30/04/2010 | Written resolution of the sole manager of LuxSCS ([…] as president) | Approval of LuxOpCO's annual accounts as of 31 December 2009; Approval of AEH's annual accounts as of 31 December 2009. | |
| 28/05/2010 | Written resolution of the sole manager of LuxSCS ([…] as president) | Settlement of LuxSCS' annual accounts as of 31 December 2009 and resolution to submit it to the shareholders of LuxSCS and to discharge the sole manager of LuxSCS for the accounting year ending on 31 December 2009; Acknowledgement of the change of registered office of LuxSCS' shareholders and sole manager. | |
| 14/06/2010 | Written resolution of the shareholders of LuxSCS ([…] as president, […] as vice president, […] as vice president and treasurer) | Approval of the annual accounts as of 31 December 2009 and allocation of the result; Discharge of the sole manager for the financial year ending on 31 December 2009. | |
| 05/07/2010 | Written resolution of the sole manager of LuxSCS ([…] as president) | Ratification of shareholder's advances in cash made by the LuxSCS to AEH; Approval of increase the share capital of AEH by way of a contribution in kind of a receivable. | |
| 13/12/2010 | Written resolution of the sole manager of LuxSCS ([…] as president) | Ratification of shareholder's advances in cash made by the LuxSCS to AEH; Proposal to increase the share capital of AEH by way of a contribution in kind of a receivable; Powers of attorney to […], […] and […] to act on behalf of LuxSCS in this respect. | |
| 07/04/2011 | Written resolution of the shareholders of LuxSCS ([…] as president, […] as vice president) | Approval of the allocation of the EUR equivalent of GBP 41 M to a special reserve of LuxSCS further to the contribution by Amazon.com Int'l Sales, Inc., of 3 115 shares it holds in Video Island Entertainment Ltd | |
| 07/04/2011 | Written resolution of the shareholders of LuxSCS ([…] as president) | Resolution to recommend to the shareholders of LuxSCS the allocation of the EUR equivalent of GBP 41 M to a special reserve of LuxSCS further to the contribution by Amazon.com Int'l Sales, Inc., of 3 115 shares it holds in Video Island Entertainment Ltd; Approval of the contribution by LuxSCS to its wholly owned subsidiary LuxOpCo of 3 115 shares held in video Island Entertainment Limited. | |
| 23/05/2011 | Written resolution of the shareholders of LuxSCS ([…] as president, […] as vice president, […] as vice president and treasurer) | Approval of the annual accounts as of 31 December 2010 and allocation of result; Discharge of the sole manager for the financial year ending on 31 December 2010. | |
| 23/05/2011 | Written resolution of the sole manager of LuxSCS ([…] as president) | Settlement of LuxSCS 's annual accounts as of 31 December 2010 and resolution to submit such annual accounts to the LuxSCS's shareholders for approval; Proposal to give discharge to the sole manager of LuxSCS for the accounting year ending on 31 December 2010. | |
| 01/07/2011 | Written resolution of the sole manager of LuxSCS ([…] as president) | Ratification of a shareholder's advance in cash made by LuxSCS to AEH; Approval, as sole shareholder, of the increase of the share capital of AEH by way of a contribution in kind of a receivable. | |
| 25/01/2012 | Written resolution of the sole manager of LuxSCS ([…] as president) | Acknowledgement of the resignation of Mr […] as manager of LuxOpCo and AEH approval of the granting of discharge; Acknowledgement of the appointment of Mr […] as new manager of LuxOpCo and AEH; Approval of the amendment of the corporate signatory policy of LuxOpCo and AEH; Ratification of the shareholder's advance in cash made by the sole shareholder to LuxSCS; Approval of the increase of the share capital of AEH by way of a contribution in kind of a claim; Ratification of the entering by the LuxSCS into amended and restated credit facility agreement; Ratification of the entering by the LuxSCS into an IP assignment agreement dated March 28, 2011 with [acquisition Q]. | |
| 23/04/2012 | Written resolution of the sole manager of LuxSCS ([…] as president) | Settlement of LuxSCS' annual accounts as of 31 December 2011 and discharge of the sole manager of LuxSCS for the accounting year ending on 31 December 2011; Approval as shareholder of LuxOpCo of the annual accounts as of 31 December 2011; Approval as shareholder of AEH of the annual accounts as of 31 December 2011. | |
| 27/04/2012 | Written resolution of the shareholders of LuxSCS ([…] as president, […] as vice president, […] as vice president and treasurer) | Approval of the annual accounts as of 31 December 2011 and allocation of the result; Discharge of the sole manager for the financial year ending on 31 December 2011. | |
| 27/08/2012 | Written resolution of the sole manager of LuxSCS ([…] as president) | Approval of the resignation of Mr […] as manager of LuxOpCo and AEH; Approval of the appointment of Mr […] and Mr […] as new managers of LuxOpCo and AEH and the amendment of the corporate signatory delegation policy of LuxOpCo and AEH; Ratification of the shareholder's advance in cash made by LuxSCS to AEH; Approval of an increase of the share capital of AEH by way of a contribution in kind. | |
| 12/12/2012 | Written resolution of the sole manager of LuxSCS (represented by […] by virtue of a delegation of authority) | Ratification of the appointment of Mr […] as new manager of LuxOpCo and AEH; Approval of the amendment of the corporate signature policy of LuxOpCo and AEH; Approval of the resignation of Mr […] as manager of LuxOpCo and AEH. | |
| 02/04/2013 | Written resolution of the sole manager of LuxSCS (represented by […] by virtue of a delegation of authority) | Settlement of LuxSCS' annual accounts as of 31 December 2012 and discharge of the sole manager of LuxSCS; Approval as shareholder of AEH of the annual accounts as of 31 December 2012; Approval as shareholder of LuxOpCo of the annual accounts as 31 December 2012; Ratification of the entry by LuxSCS into an asset purchase agreement for the acquisition of certain assets from [acquisition W1] and [acquisition W2]; Approval of the entering by LuxSCS into an amendment to an IP assignment agreement with Elkotob.com LLC. | |
| 08/04/2013 | Written resolution of the shareholders of LuxSCS (represented by […] by virtue of a delegation of authority, […] as vice president, […] as vice president and treasurer) | Approval of the annual accounts as of 31 December 2012 and allocation of the result; Discharge of the sole manager for the financial year ending on 31 December 2012. |
On 14 January 2005, the sole manager of LuxSCS approved and ratified that LuxSCS had already entered into the Buy-In Agreement and two cost sharing agreements (including the CSA) during December 2004 and January 2005.
On 28 April 2006, within the context of the reorganisation of the European retail operations, the sole manager of LuxSCS approved the assignment of the editorial contents, trademarks and domain names from Amazon.co.uk Ltd, Amazon.fr Holding SAS and Amazon.de GmbH to LuxSCS as well as the conclusion of the License Agreement with LuxOpCo. The sole manager was further authorised to execute those agreements.
On 25 January 2012, the sole manager of LuxSCS approved and ratified the IP assignment agreement with [acquisition Q] as entered into by LuxSCS and effective as of 29 March 2011. The sole manager was further authorised to execute the IP assignment agreement.
On 2 April 2013, it was reported that LuxSCS and ATI had entered into an asset purchase agreement dated 1 March 2013 to acquire certain assets from a third party comprising software codes and all related intellectual property rights. The sole manager of LuxSCS ratified the asset purchase agreement and the license to LuxOpCo.
| (USD) | ||||||
| Variable unit fees (USD/units) | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | Year 6 |
|---|---|---|---|---|---|---|
| Sortable | 2,36 | 2,36 | 2,10 | 1,87 | 1,78 | 1,78 |
| Conveyable | 3,83 | 3,83 | 3,57 | 3,27 | 3,13 | 3,13 |
| Non-sortable or non-conveyable | 4,83 | 4,83 | 4,81 | 4,48 | 4,28 | 4,28 |
| Drop-ship units | 0,75 | 0,75 | 0,75 | 0,75 | 0,75 | 0,75 |
| […] Gift Card Drop-Ship Units | 0,75 | Gift Card free | ||||
| Customer Return Processing | Same as variable unit fee for each such […] product returned to Amazon or its affiliates | |||||
| Vendor Return Processing | 1,00 | 1,00 | 1,00 | 1,00 | 1,00 | 1,00 |
Sales commissions paid by [A]
| (%) | ||||||
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | Year 6 | |
|---|---|---|---|---|---|---|
| Product Sales Commission (other than catalogue-branded […] products) | 5,0 | 5,0 | 4,5 | 4,0 | 4,0 | 4,0 |
| Additional Apparel Product Sales Commission | 2,5 | 2,5 | 3,0 | 3,5 | 3,5 | 3,5 |
| Product Sales Commission (catalogue-branded […] products) | 2,0 | 2,5 | 2,5 | 2,5 | 3,0 | 3,0 |
The lower listing fee ‘reflects the […] financial situation and outlook [description of the state of the Retail business market and Amazon's strategy]’(260).
[Description of Amazon's commercial strategy]. If […] were to charge a listing fee of [4-6] % to cover its costs of providing the platform service [Amazon projections], both of which would be detrimental to […]. On the other hand, the discount […] will be required to grant will be limited by […]. Given that the allocation of technology and platform expenses is about [4-6] percent of LuxOpCo's projected retail revenues in 2014 it is […]. Thus, a listing fee that is less than [4-6] percent would appear to be a better alternative for LuxOpCo than LuxOpCo investing in the technology and platform itself(261).
Sales (or Turnover or Revenue)
Cost of goods sold (COGS)
Gross Profit
Operating Expense (OpEx)
Operating profit (EBITDA)
Earnings before interest and taxes (EBIT) or operating income
Interest and and exceptional or extraordinary income
Taxable income
Tax
Net profit
3. GROUNDS FOR INITIATING THE PROCEDURE
4. COMMENTS FROM LUXEMBOURG
LuxOpCo's taxable profit expressed in relation to operating expenses of LuxOpCo in Luxembourg (excluding costs rebilled by the EU subsidiaries) (a) and to the operating expenses of LuxOpCo including the costs rebilled EU subsidiaries (b)
| (%) | |||||||||
| Year | 2006 | 2007 | 2008 | 2009 | 2010 | 2011 | 2012 | 2013 | Total(2006-2013) |
|---|---|---|---|---|---|---|---|---|---|
| (a) | 13,8 | 12,0 | 10,9 | 10,4 | 11,4 | 11,5 | 11,0 | [10 – 15] | [10 - 15] |
| (b) | 4,1 | 4,4 | 4,2 | 4,2 | 3,9 | 3,8 | 3,2 | [2,5 – 3] | [3,5 – 4] |
5. COMMENTS FROM INTERESTED PARTIES
6. INFORMATION SUBMITTED BY COMPANY X
7. COMMENTS FROM LUXEMBOURG ON THIRD PARTIES' COMMENTS AND ON INFORMATION SUBMITTED BY COMPANY X
8. FURTHER SUBMISSIONS BY AMAZON
9. ASSESSMENT OF THE CONTESTED MEASURE
Unique customers counts by referring site and year
| (in million) | ||||||||||
| 2005 | 2006 | 2007 | 2008 | 2009 | 2010 | 2011 | 2012 | 2013 | 2014 | |
|---|---|---|---|---|---|---|---|---|---|---|
| Amazon.co.uk | 8,3 | 9,9 | 11,9 | 14,0 | 17,3 | 20,2 | 24,1 | 27,5 | [30-40] | [30-40] |
| Amazon.de | 7,3 | 8,5 | 10,3 | 12,3 | 14,8 | 17,5 | 20,3 | 23,6 | [20-30] | [20-30] |
| Amazon.fr | 1,4 | 1,9 | 2,5 | 3,2 | 4,3 | 5,5 | 7,0 | 8,7 | [10-20] | [10-20] |
Comparison of LuxOpCo's profit determined based on the contested tax ruling and calculated similarly to the profit level indicator used for comparable entities in the transfer pricing report
| (EUR million) | |||||||||
| 2006 | 2007 | 2008 | 2009 | 2010 | 2011 | 2012 | 2013 | Total | |
|---|---|---|---|---|---|---|---|---|---|
| Profit attributed to LuxOpCo according to the contested | 11 | 20 | 22 | 27 | 36 | 55 | 73 | [80-90] | [300-400] |
| Profit of LuxOpCo at [4-6] % of total costs (no ceiling/foor) | 84 | 147 | 177 | 228 | 315 | 429 | 573 | [600-700] | [2 500-3 000] |
10. RECOVERY
11. EVIDENCE RELIED UPON BY THE COMMISSION FOR A FINDING OF AID
12. CONCLUSION
HAS ADOPTED THIS DECISION:
If not otherwise stated, the Commission accepted all of Luxembourg's and Amazon's requests for an extension of deadline.
Confidential information.
The designation ‘LuxOpCo’ is used by Amazon in its ruling requests of 23 October 2003 and 31 October 2003.
The designation ‘LuxSCS’ is used by Amazon in its ruling requests of 23 October 2003 and 31 October 2003.
Several exchanges on confidentialities have taken place, which are however not separately mentioned in this Section.
Amazon internal documents: Amended and Restated Agreement to share Costs and Risks of Intangible Development entered into and effective as of 1 January 2005, Amended and Restated Agreement to share Costs and Risks of Intangible Development entered into on 2 July 2009 and effective as of 5 January 2009, and First amendment to Amended and Restated Agreement to share Costs and Risks of Intangible Development entered into in February 2014 and effective as of 1 January 2014.
Council Regulation (EC) No 659/1999 of 22 March 1999 laying down detailed rules for the application of Article 108 of the treaty on the functioning of the European Union (OJ L 83, 27.3.1999, p. 1). Regulation (EC) No 659/1999 was repealed and replaced by Council Regulation (EU) 2015/1589 of 13 July 2015 laying down detailed rules for the application of Article 108 of the Treaty on the Functioning of the European Union (OJ L 248, 24.9.2015, p. 9), with effect from 14 October 2015. Any reference to Regulation (EC) No 659/1999 may be construed as a reference to Regulation (EU) 2015/1589 and should be read in accordance with the correlation table in Annex II to the latter regulation.
See Recital 13.
The License Agreement was submitted by Amazon on 5 March 2015, Annex 4 (together with the later Amendment 1 of IP License Agreement as effective as of January 1 2009).
Amazon.com Inc., 2016 Annual Report, p. 18.
Amazon.com Inc., 2016 Annual Report, p. 3.
Amazon.com Inc., 2003 Annual Report, p. 5.
Fulfilment refers to the process initiated in a company when an order for a product is received. This includes warehousing, finding the item ordered, packaging it, and dispatching it (directly or through third parties).
https://services.amazon.com/fulfillment-by-amazon/benefits.htm/ref=asus_fba_hnav.
Amazon.com Inc., 2002 Annual Report, p. 2. See also TP Report, p. 6-7.
Amazon Post trial brief, p. 81, par. 253.
The term ‘EU websites’ as used throughout this Decision excludes www.amazon.nl, since this website was launched after the period subject to review in this Decision.
Amazon.com Inc., 2016 Annual report, p. 3.
Amazon.com Inc., 2016 Annual report, p. 4 and 67.
The term ‘EU Local Affiliates’ as used throughout this Decision includes Amazon.co.uk Ltd, Amazon.fr SARL, Amazon.fr Logistique SAS, Amazon.de GmbH and Amazon Logistik GmbH which all were EU Local Affiliates as of 1 May 2006.
TP Report, p. 12.
Amazon's submission of 5 March 2015: Annex 6.
Amazon's submission of 5 March 2015: Annex 6.
TP Report, p. 13: ‘As of the Restructuring Date, LuxSCS' principal activities will be limited to those of an intangible holding company and a participant in the ongoing development of the Intangibles through the CSA. Additionally, LuxSCS will license the Intangibles to LuxOpCo, subject to the Intangibles License, and will receive royalty payments pursuant to this license’.
Amazon's letter of 20 April 2006 to the Luxembourg tax administration (as drafted by Amazon's tax advisor [Advisor 1]), p. 2: ‘EHT [LuxSCS], a wholly owned indirect subsidiary of Amazon.com Inc. was created for the purpose of holding and developing intellectual property (by way of financial contribution only). […] EHT [LuxSCS] has an activity limited to the mere holding of Amazon's EU intellectual property, the shares in AEU and has concluded a limited number of legal agreements necessary for the Luxembourg structure to operate (as described under point 1.2 below). EHT [LuxSCS] will only receive passive income from its subsidiaries (interest and royalties).’ Point 1.2 of this letter describes the agreements described in Recital 105 of this decision.
LuxSCS annual financial reports 2005-2013. The intracompany loan by LuxSCS to LuxOpCo increased in the period under review to EUR [2-2,5] billion in 2013. Other group company provided with some limited financing by LuxSCS was Amazon Eurasia Holding Sarl (EUR [20-30] million in 2013).
License Agreement For Pre-existing Intellectual Property and Assignment Agreement For Pre-existing Intellectual Property, both between LuxSCS and ATI as of 1 January 2005.
Amended and restated agreement to share costs and risks of intangible development between LuxSCS, ATI and A9 as of 1 January 2005. The cost sharing agreement prior to the 2005 CSA was concluded between LuxSCS and A9 and was effective as of 7 June 2004. The CSA was again amended and restated as effective as of 5 January 2009 and again amended as effective as of 1 January 2014.
Intellectual Property Assignment and License Agreement between LuxSCS, Amazon.fr SARL, Amazon.de GmbH and Amazon.co.uk Ltd as of 30 April 2006.
Pursuant to the CSA, paragraph 1.8, ‘Derivative works’ means ‘any and all new works created by or for one Party [to the CSA] from pre-existing material contained within, or as a result of access to or use of another Party's intellectual property, […]’.
CSA, section 6 (License and Ownership). As set out in the CSA, paragraph 6.4, besides the licenses to the Intangibles provided by A9 and ATI to LuxSCS under the CSA, LuxSCS retained the title and ownership to all Intangibles contributed by it.
CSA, paragraph 1.13 on the ‘Licensed Purpose’.
CSA, section 4, ‘Development Cost Allocation’ and section 5, ‘Payments’.
CSA, paragraph 9.12.
CSA as effective on 5 January 2009, paragraph 2.3.
As explained in the CSA, section 1.1, A9's contribution of IP rights to the CSA is limited to the intellectual property rights owned or otherwise held by A9 with respect to ecommerce search and navigation technologies.
These include the technology for Amazon's software platform, appearance of the EU websites, catalogues, search and navigation functions, logistics process, order processing, customer service and personalisation functions. See Recital 174 and following for further details.
This is a collection of data on products and customers. It includes customer reviews, publisher reviews, product data, customer names, purchase histories and other data. As explained in Amazon's submission of 21 August 2015, LuxSCS took over the legal ownership of the European customer data accumulated by Amazon Int'l Sales, Inc. and Amazon Int'l Marketplace, Inc. as part of the restructuring of the European operations. The customer database was subsequently further developed and maintained by LuxOpCo.
These include the trade mark, trade name, style, logos, presentation of Amazon and associated intangible assets.
CSA, paragraphs 1.1, 1.4 and 1.11 provide: ‘Notwithstanding the foregoing, the parties expressly agree that the […][Intangibles] does not include any World Wide Web domain names’.
As explained in Amazon's submission of 12 June 2015, LuxSCS transferred the shares in LuxOpCo to Amazon Europe Core S.à r.l. on 16 December 2013.
TP Report, p. 12.
TP Report, p. 30.
Amazon's submission of 5 March 2015, rec. 6 and Amazon internal document: Amazon's letter to the Luxembourg Tax Administration of 14 April 2006, p. 2.
TP Report, p. 30.
TP Report, p. 13.
The seller of record is the entity which owns and offers the goods for sale and which is responsible for collection and payment of value added tax.
The Parliament of the United Kingdom, House of Commons: Report on HMRC's 2011-2012 Accounts — Written evidence from Amazon EU Sarl by Andrew Cecil (Director EU Public Policy, LuxOpCo, Luxembourg), 13 November 2012: ‘Amazon EU Sarl owns the inventory, earns the profits associated with the selling these products to end customers and bears the risk of any loss. From Luxembourg, Amazon EU Sarl processes and settles payments from its European customers.’ Available at: https://publications.parliament.uk/pa/cm201213/cmselect/cmpubacc/writev/716/m03.htm.
Amazon's submission of 22 March 2016, p. 1-2 and annex E thereto.
LuxOpCo managed the cash pooling and liquidity management of Amazon's European operations; cf. Amazon internal document: Luxembourg Headquarters – Overview, p. 11-17 and Amazon internal document: Pre & Post Goldcrest Balance Sheet Analysis, p. 1 and Amazon internal document: Advance Tax Agreement, Letter of Amazon to Mr […], 2 April 2014, par. 11 and Amazon Internal Document: EU Policies and Procedures Manual, effective 1 May 2006, p. 3.
Amazon's letter of 14 April 2006 to the Luxembourg Tax Administration, p. 2.
In a fiscal unity (le régime d'intégration fiscal), a parent company may be taxed as a group together with one or more of its subsidiaries. For corporate income tax purposes, this means that the subsidiaries are deemed to have been absorbed by the parent company. To be eligible for a fiscal unity, the parent company must hold, directly or indirectly, a participation of 95 % or more in the share capital of a subsidiary and both the consolidating parent as well as the subsidiaries are capital companies resident in Luxembourg that are fully subject to corporate income tax. The consolidation is for at least five accounting years (Article 164bis LIR).
TP Report, p. 12.
Amazon's submission of 6 March 2017, Annex 28a.
TP Report, p. 12.
See Section 2.3.3.3.
Amazon internal documents: the Amended and Restated Service Agreement between LuxOpCo and Amazon.fr SARL, the Amended and Restated Service Agreement between LuxOpCo and Amazon.fr Logistique SAS, the Amended and Restated Service Agreement between LuxOpCo and Amazon.co.uk Ltd, the Amended and Restated Service Agreement between LuxOpCo and Amazon Logistik GmbH, and the Amended and Restated Service Agreement between LuxOpCo and Amazon.de GmbH, all as of 1 May 2006.
See Recital 109.
Services Agreements, paragraph 4.1 (Fees): ‘In consideration of [EU Local Affiliate]'s performance of the Services, [LuxOpCo] shall pay [EU Local Affiliate] fees (the ‘Service Fees’) equal to the Applicable Costs (as defined in Exhibit 1) incurred by [EU Local Affiliate] in providing the corresponding Services, plus the Applicable Markup set forth in Exhibit 1. […].’ Exhibit 1 provides that the ‘Applicable Costs’ is the sum of all operating expenses, as determined pursuant to generally accepted accounting principles in the US, directly and indirectly related to the Services, excluding interest expense, dividends paid by EU Local Affiliate, foreign exchange expense or any other expense excluded by mutual agreement, as deemed appropriate. The ‘Applicable Markup’ is a percentage of the Applicable Costs which varies from 3 – 8 % depending on the characteristics of the service provided and the EU Local Affiliate.
As explained in the Recitals to the Service Agreements, the cost plus mark-up is determined on basis of a ‘comprehensive economic analysis’ of the arm's length rate of compensation for the services provided by the EU Local Affiliates to LuxOpCo.
License Agreement, paragraph 1.4: ‘European Country’ means ‘(a) the economic, scientific, and political organization known as the European Union consisting, as of the Effective Time [30 April 2006], of Belgium, France, Italy, Luxembourg, Netherlands, Germany, Denmark, Greece, Ireland, United Kingdom, Spain, Portugal, Austria, Finland, Sweden, Cyprus, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia, and Slovenia, and including any and all other countries that may become members of such organization during the Term, and (b) any countries listed as ‘Applicant countries’ or ‘Other European countries’ on the Web page located at http://europa.eu.int/abc/governments/index_en.htm#, or any successors thereto or replacements thereof.’
License Agreement, paragraph 2.1(a), and paragraph 1.5 on the Licensed Purpose. Paragraph 2.1(a) provides: ‘(a) ‘Exclusive Intellectual Property License Grant’. Amazon EHT [LuxSCS] irrevocably grants AEU [LuxOpCo], under all Amazon EHT [LuxSCS] intellectual property rights in or comprising the Amazon EHT [LuxSCS] Intellectual Property, whether existing now or in the future, the following sole and exclusive right and license to the Amazon EHT [LuxSCS] Intellectual Property during the Term, solely for the Licensed Purpose, to: (i) make, use, reproduce, copy, modify, translate, integrate into or extract from a database and create derivative works of Amazon EHT [LuxSCS] Intellectual Property; (ii) publicly perform or display, import, broadcast, transmit, distribute and communicate to the public by any means whatsoever, including but not limited to wire or wireless transmission process, using broadcasting, satellite, cable or network, license, offer to sell, and sell, rent, lease or lend originals and copies of, and otherwise commercially or non-commercially exploit any Amazon EHT [LuxSCS] Intellectual Property (and derivative works thereof); and (iii) sublicense to Affiliates or third parties the foregoing rights, including the right to sublicense to further third parties. […].’
Amazon internal document: License Agreement, paragraph 2.5 (License Fee), and Exhibit A.
Such Intangibles were referred to as ‘Derivative Works’ in the License Agreement, which according to paragraph 1.3 means ‘any and all new works created by or for AEU [LuxOpCo] from pre-existing material contained within, or as a result of access to or use of the Amazon EHT [LuxSCS] Intellectual Property [including the Intangibles][…]’.
Amazon internal document: License Agreement, paragraph 2.1(b): ‘AEU [LuxOpCo] irrevocably and exclusively assigns and agrees to assign to Amazon EHT [LuxSCS], its successors, and assigns, all right, title, interest and ownership in and to any and all Derivative Works of the Amazon EHT [LuxSCS] Intellectual Property created by or for AEU [LuxOpCo] as provided under Section 2.1(a)’.
License Agreement, section 9.2: ‘(a) AEU [LuxOpCo] shall, at its sole expense, use its best efforts to prevent, investigate, and prosecute any unauthorised use of any Amazon EHT [LuxSCS] Intellectual Property. AEU [LuxOpCo] agrees to promptly inform Amazon EHT [LuxSCS] of any such unauthorised use that comes to the AEU [LuxOpCo]'s attention. To facilitate coordination of enforcement activities, AEU [LuxOpCo] shall consult with Amazon EHT [LuxSCS] before undertaking any actions to prevent such unauthorised use of Amazon EHT [LuxSCS] Intellectual Property. (b) AEU [LuxOpCo] may, at its sole expense, institute and conduct suits to protect its rights under this Agreement against infringement any may retain all recoveries from any such suits.’ See also License Agreement, paragraph 2.3 (Maintenance) and paragraph 9.5 (Compliance, Data Protection).
Amazon internal document: License Agreement, paragraph 3.1.
License Agreement, paragraph 7 (No Warranties): ‘Each party provides its materials and services to the other pursuant to this agreement ‘as is,’‘with all faults’ and without warranties of any kind, express, implied, statutory or otherwise, including any implied warranties of merchantability, fitness for a particular purpose, reasonable care, workmanlike effort, results, lack of viruses, accuracy or completeness, all of which each party expressly disclaims, and each party assumes the entire risk as to the results and performance of those services and the materials. There is no warranty of title or noninfringement of any intellectual property rights or any warranty against interference with either party's or any other entity's enjoyment of information provided to it relating to this agreement’.
So-called ‘third party materials’. For example, in February 2011 LuxOpCo acquired full ownership of the LoveFilm Group, including the intellectual property of that group (See Amazon's submission of 4 May 2015). As part of the post-acquisition integration of the [acquisition Q], it was decided by Amazon to centralise all ‘digital content rights’ […] in LuxOpCo. […]. License Agreement, section 3.2, provides: ‘Third Party Materials, From time to time during the Term, AEU [LuxOpCo] may license or otherwise acquire rights to or ownership of third party materials, which AEU [LuxOpCo] may use in connection with the Licensed Purpose (‘Third Party Materials’). If in connection with obtaining a license to Third Party Materials, AEU [LuxOpCo] acquires the right to sublicense such Third Party Materials to Amazon EHT [LuxSCS], then AEU [LuxOpCo] hereby grants to Amazon EHT [LuxSCS] a royalty free and non-exclusive right and license to use such Third Party Materials during the Term in the same manner as and for the same purposes that such Third Party Materials have been licensed to AEU [LuxOpCo]. If AEU [LuxOpCo] acquires ownership of any Third Party Materials, then AEU [LuxOpCo] hereby grants Amazon EHT [LuxSCS] a royalty free and non-exclusive tight and license to use such Third Party Materials during the Term to the full extent that AEU [LuxOpCo] can use such Third Party Materials as the owner of the Third Party Material’.
Amazon's submission of 18 January 2016: ‘Both LuxOpCo and ASE rely on the Intangibles in operating their businesses. Inventory risk management, pricing, fulfilment, management and third party registration on Amazon's marketplaces, to name a few, are automated to a very large extent and the required technology is licensed from LuxSCS. As a result of this automation, these functions require limited involvement from LuxOpCo and ASE's employees beyond monitoring and management’.
License Agreement, paragraph 2.1(a) (Exclusive Intellectual Property License Grant). See footnote 64.
Service Agreements, paragraph 3.1 (Use by Provider).
Service Agreements, paragraph 3.2 (Ownership by Company).
License Agreement, paragraph 4.1 (Term).
License Agreement, paragraph 4.2 (Immediate Termination upon Notice for Change of Control or Substantial Encumbrance).
License Agreement, paragraph 4.3 (Termination After Failure to Cure of Performance).
Luxembourg's submissions of 21 November 2014, Annex 4.
See Recital 128 for the definitions of terms used in the License Fee calculation. Following the amendment, ‘EU Operating Profits’ means EU Revenue minus EU COGS and EU Operating Expenses and, as agreed upon by the Parties from time to time, certain expenses, at cost, not included in the AEU Operating Expenses.
See footnote 84.
As explained in Recital 102, Amazon's European structure, as referred to in the ruling request and as endorsed by the contested tax ruling, was put into place from May 2006-June 2014. In June 2014, that structure was changed.
As explained in Amazon's letter of 31 October 2003, p. 4: ‘Notwithstanding the tax transparency of LuxSCS, it would have been subject to municipal business tax (Article 2 MBTL) on its profits if these profits are derived by a permanent establishment situated in Luxembourg from the carrying out of a ‘commercial activity’ as defined by Article 14-1 ITL’.
This letter and Amazon's letter of 31 October 2003 were supplemented with additional information on the restructuring in Amazon's letters to the Luxembourg tax administration of 5 December 2004, 14 April 2006 and 20 April 2006. The Luxembourg tax administration confirmed in its letters to Amazon on 23 December 2004 and 27 April 2006 that: ‘As the changes discussed in your letter of April 14, 2006 and in the letter of April 20, 2006 by Mr […] from [Advisor 1] will have no effect on the taxation of your group's companies, my letter of November 6, 2003 will remain in force. So, I have no objections to the content of the letters of April 14, 2006 and April 20, 2006 respectively.’
Amazon's letter of 23 October 2003, p. 5.
Amazon's letter of 23 October 2003, p. 6.
TP Report, see Recital 4.
See TP Report, section 4.1. Overview of Methods.
Amazon's letter of 31 October 2003 further explains that ‘LuxSCS will retain any and all risk associated with the ownership of the IP rights’.
TP Report, p. 13.
Amazon's letter of 23 October 2003, p. 3-4. The management is expected to account for 8-10 FTEs, and includes the following positions: General Manager Europe, Luxembourg Country Manager, Director, Pan-European Supply Chain, Director, Pan-European Operational Excellence, Director, Pan-European Operations Engineering, Director of Information Technology, Director of Operations Finance, Europe and Director of Operations Finance, Europe.
Confidential information.
TP Report, p. 30.
TP Report, p. 13.
TP Report, p. 13.
TP Report, p. 13.
TP Report, p. 13.
Amazon's letter of 23 October 2003, p. 4.
TP Report, p. 14.
TP Report, p. 29.
TP Report, p. 30.
TP Report, p. 20-21.
See […].
Amazon's submission of 28 October 2015: ‘Meeting with the Case Team’, p. 8.
USD 7 million in the first year and USD 8 million in the second year of the contract; in: Amazon internal document: Agreement between Amazon and [A], p. 155.
Ranging from USD 7 million in the second year of the agreement to USD 35 million in the fifth year; in: Amazon internal document: Agreement between Amazon and [A], p. 155.
Initially 5 %, diminishing to 4 % in the fourth and the subsequent years; in: Amazon internal document: Agreement between Amazon and [A], p. 157.
TP Report, p. 30.
TP Report, p. 28.
The Amadeus database is a database of financial information for public and private companies across Europe. It is maintained by Bureau van Dijk, or BvD, a publisher of company information and business intelligence.
The tax advisor limited the search to the following countries: Austria, Belgium, Denmark, Finland, France, Germany, Greece, Italy, Luxembourg, Netherlands, Norway, Portugal, Spain, Sweden and Switzerland.
The following keyword search terms were used: Computational, Design, Marketing, Merchandising, Programming, Promotion, Services, Web Design.
Algoriel, Askell, Decade, Seresco SA, Societe de Gestion de Terminaux Informatiques, Solutec and Sydelis.
TP Report, Annex V.
TP Report, Annex V, p. 46.
TP Report, p. 31.
TP Report, p. 31.
TP Report, p. 32.
TP Report, p. 34.
Due to LuxSCS's treatment as a fiscally transparent entity in Luxembourg, royalty payments from LuxOpCo to LuxSCS are not considered taxable income of LuxSCS in Luxembourg, but of its partners in the US. Moreover, with effect from 1 January 2004, Luxembourg has not imposed any withholding tax on royalty payments on intangible property to non-resident recipients. Accordingly, no taxes are levied on LuxSCS's profits by Luxembourg. By contrast, since the US does not consider LuxSCS as fiscally transparent, but rather as a separate corporate entity resident in Luxembourg, the taxation of the LuxSCS's partners in the US may be deferred indefinitely, so long as none of LuxSCS's profits are repatriated to the US. The different tax treatment of LuxSCS in Luxembourg (fiscally transparent) and in the US (fiscally non-transparent) thus arises from a so-called ‘hybrid mismatch’, i.e. a difference in the Luxembourg and US tax rules on the entity's characterisation.
As explained in Recital 127.
These support services included, among others, general administrative, corporate and public relations, accounting and auditing, budgeting, tax and legal support as well as training and employee development.
Amazon's submission of 21 August 2015, p. 7-8.
[Advisor 3] Report: ‘E-commerce in Europe between 2006 and 2013: dynamics and economics’, 11 May 2017. As indicated on p. 7: ‘Online retail is a segment of the e-commerce sector. Online retail focusses on online sales of physical goods by online retailers, i.e., operators purchasing goods, holding them in their inventory and selling these goods online.’
[Advisor 3] Report, 11 May 2017, Preamble, p. 7.
[Advisor 3] Report, 11 May 2017, par. 18 and 67, p. 8 and p. 30.
[Advisor 3] Report, par. 18. As explained in par. 20 of the [Advisor 3] Report, ‘[t]he main difference between traditional retailers and online retailers lies in the product distribution channel used: Online retailers sell their products through a website and deliver them to customers using advanced information systems and complex logistics infrastructure without physical stores. Their cost structure reflects the investments in the IT and in shipping and logistics infrastructure and technology; Traditional physical retailers distribute their products in stores, and bear the costs of renting the physical outlets, which are not borne by online retailers’.
[Advisor 3] Report, 11 May 2017, par. 24-25, p. 11.
[Advisor 3] Report, 11 May 2017, par. 29, p. 13.
The report indicates that this would be the UK, Germany, France, Spain and Italy.
[Advisor 3] Report, 11 May 2017, par.11, p. 5.
[Advisor 3] Report, 11 May 2017, par.12, p. 5.
[Advisor 3] Report, 11 May 2017, par. 77, p. 33-34.
See Amazon.com Inc., 2016 Annual Report, p. 3: ‘We serve consumers through our retail websites and focus on selection, price, and convenience’.
Amazon offers a wide selection of consumable and durable goods that includes electronics and general merchandise as well as media products available in both a physical and digital format, such as books, music, video, games, and software; Amazon.com, Inc. 2016 Annual Report, p. 68.
Convenience is based on continuous innovation in software development, merchandising and management; See Amazon.com Inc., 2006 Annual Report, p. 4. As further confirmed by statements of Amazon employees, see email of [Senior Vice President Product Management – Retail, Amazon Corporate LLC, US], dated 16 June 2008, in: Deposition of [Vice President International Retail, Amazon Corporate LLC, US, former Head of European Retail Business, responsible for all retail operations in Europe, LuxOpCo, Luxembourg] – Exhibit 25: ‘We need to continue to focus on the retail basics: driving down COGS, driving fast track in-stock, category expansion, selection expansion within categories.’ and Amazon Final Transcripts: [Vice President Sales International, Amazon Corporate LLC, US, former Head of European Third Party Business (such as Marketplace), LuxOpCo, Luxembourg], 4 November 2014, par. 826:17-18: ‘You know, we are a very physical business at the end of the day’.
Amazon Final Transcripts: [Vice President International Retail, Amazon Corporate LLC, US, former Head of European Retail Business, responsible for all retail operations in Europe, LuxOpCo, Luxembourg], 3 November 2014, par. 427:18-23.
Amazon Final Transcripts: [Senior Vice President Product Management – Retail, Amazon Corporate LLC, US], 4 November 2014, par. 588:25, par. 589:1-4.
Amazon Post trial brief, p. 18, par. 35, and Amazon Final Transcripts: [Vice President International Retail, Amazon Corporate LLC, US, former Head of European Retail Business, responsible for all retail operations in Europe, LuxOpCo, Luxembourg], 3 November 2014, par. 427:18-23, Amazon Final Transcripts: [Vice President International Retail, Amazon Corporate LLC, US, former Head of European Retail Business, responsible for all retail operations in Europe, LuxOpCo, Luxembourg], 3 November 2014, par. 427:18-23.
Amazon Post trial brief, p. 19, par. 39-41.
Amazon Post trial brief, p. 28, par. 71.
Selection also includes having the suitable accessories. Offering the right accessories is very important for Amazon in particular for achieving a positive margin in its sales of electronic goods. See Deposition of [Vice President and Country Manager Germany, Amazon Deutschland Services GmbH, Munich, Germany], 13 June 2014, p. 200, par. 24-25, p. 201, par. 1-7: ‘I mean, in general, it is life critical for a successful electronic retailer to sell accessories with the device for the simple reason you make no margin on the device or low margin, and you make higher margin on the accessories, with the exception of few others that have managed to make high margin on devices, but the usual stuff is, the money is made on the accessory and it's critical’. Matching the product with a suitable selection of fitting accessories cannot exclusively be done by an algorithm, but requires (local) human intervention, see Deposition [Vice President and Country Manager Germany, Amazon Deutschland Services GmbH, Munich, Germany], 13 June 2014, p. 201, p. 203, par. 8-11, par. 9-17, p. 204, par. 3-14: […].
See, Deposition [Vice President and Country Manager Germany, Amazon Deutschland Services GmbH, Munich, Germany], 13 June 2014, p. 21, par. 11-12: ‘You need to have something to sell, right?’; See also, Amazon Final Transcripts: [Vice President European Retail Business, responsible for all retail operations in Europe, LuxOpCo, Luxembourg, former Country Manager France, Amazon.fr SAS, Clichy, France], 5 November 2014, par. 918: 10-18: ‘One would say that if you don't have a product, you can't sell it. […] The more you add selection, the more your capacity to generate revenue increases’.
Amazon Post trial brief, p. 18, par. 36.
Amazon Final Transcripts: [Vice President International Retail, Amazon Corporate LLC, US, former Head of European Retail Business, responsible for all retail operations in Europe, LuxOpCo, Luxembourg], 3 November 2014, par. 420:3-4.
Amazon Post trial brief, p. 30, par 78.
Deposition [Vice President and Country Manager Germany, Amazon Deutschland Services GmbH, Munich, Germany], 13 June 2014, p. 42, par. 15-20.
Deposition [Vice President and Country Manager Germany, Amazon Deutschland Services GmbH, Munich, Germany], 13 June 2014, p. 73, par. 20-25, p. 74, par. 2-6. The high importance of localisation was confirmed in statements of Amazon employees: Deposition [Vice President and Country Manager Germany, Amazon Deutschland Services GmbH, Munich, Germany], 13 June 2014, p. 95, par. 5-6: ‘Retail is a very local thing, […]’; Amazon Final Transcripts: [Vice President European Retail Business, responsible for all retail operations in Europe, LuxOpCo, Luxembourg, former Country Manager France, Amazon.fr SAS, Clichy, France] 5 November 2014, par. 909:10-17; ‘[…] important for us to understand is not what is selling somewhere else; it's what local customer needs and wants’.
Deposition [Vice President and Country Manager Germany, Amazon Deutschland Services GmbH, Munich, Germany], 13 June 2014, p. 43, par. 19-21. Amazon Final Transcripts: [Vice President and Country Manager Germany, Amazon Deutschland Services GmbH, Munich, Germany], 5 November 2014, par. 961: 17-23.
Deposition [Vice President and Country Manager Germany, Amazon Deutschland Services GmbH, Munich, Germany], 13 June 2014, p. 25, par. 19-20.
Amazon Final Transcripts: [Vice President Sales International, Amazon Corporate LLC, US, former Head of European Third Party Business (such as Marketplace), LuxOpCo, Luxembourg] 4 November 2014, par. 761:19-24.
Amazon Final Transcripts: [Vice President Sales International, Amazon Corporate LLC, US, former Head of European Third Party Business (such as Marketplace), LuxOpCo, Luxembourg], 4 November 2014, par. 762:1-7, par. 763: 9-10; Deposition [Vice President Sales International, Amazon Corporate LLC, US, former Head of European Third Party Business (such as Marketplace), LuxOpCo, Luxembourg], 17 January 2013, p. 23 par. 23-25, p. 24 par. 1-7: […].
Amazon Final Transcripts: [Vice President Sales International, Amazon Corporate LLC, US, former Head of European Third Party Business (such as Marketplace), LuxOpCo, Luxembourg], 4 November 2014, par. 800: 19-23.
Amazon Post trial brief, p. 19, par. 38.
Amazon Post trial brief, p. 61, par. 182: By 2005, Amazon's pricing technology was insufficient in the light of its business needs to have competitive prices and was heavily dependent on manual intervention.
Amazon Post trial brief, p. 18-19, par. 37.
See Amazon Final Transcripts: [Senior Vice President, Chief Financial Officer, Amazon Corporate LLC, US], 17 November 2014, par. 2883: 6-18, p. 78: ‘Yes. It's – I think the emphasis, though, should be on, you know, when we do marketing, this is back during this time frame, and until very recently, that the biggest portion of our marketing was to drive very specific customer transactions. And so it says increase customer traffic to our websites, that would certainly be the largest piece and the way we do that is, you know, specifically by we have an associates program, we also use various online marketing and it's to drive — if someone searches on a Samsung TV, it's to try to drive them to our, you know, detail page to buy on that transaction. That's what we're attempting to do.’
This programme was of paramount importance for Amazon. See Amazon Final Transcripts: [Senior Vice President, Product Management-Retail, Amazon Corporate LLC, US, former Vice President/General Manager Worldwide Operations, Amazon Corporate LLC, US], 14 November 2014, par.2755:1-7,:[…]. Amazon spends significant funds on this programme, cf. Table 7.
See Deposition [Vice President Sales International, Amazon Corporate LLC, US, former Head of European Third Party Business (such as Marketplace), LuxOpCo, Luxembourg], 17 January 2013, p. 175, par. 1-3. The marketing organisation was a central function in driving traffic to the Amazon website. See also Deposition [Vice President Sales International, Amazon Corporate LLC, US, former Head of European Third Party Business (such as Marketplace), LuxOpCo, Luxembourg], 17 January 2013, p. 174: 10-12; Deposition [Senior Vice President Product Management – Retail, Amazon Corporate LLC, US], 18 September 2014, p. 36: 1-3; Amazon Final Transcripts, [Vice President European Retail Business, responsible for all retail operations in Europe, LuxOpCo, Luxembourg, former Country Manager France, Amazon.fr SAS, Clichy, France], 5 November 2014, par. 907: 1-2:[…]; and Amazon Final Transcripts: [Vice President Technology-Software Development, Amazon Web Services, Inc. US] 7 November 2014, par. 1532:7-8: The Associates Program brought Amazon a ‘[…] nice influx of customers.[…].’
Deposition [Vice President Sales International, Amazon Corporate LLC, US, former Head of European Third Party Business (such as Marketplace), LuxOpCo, Luxembourg], 17 January 2013, p. 69: 24-25, p. 70: 1-6.
Deposition [Senior Vice President Product Management – Retail, Amazon Corporate LLC, US], 18 September 2014, p. 117, par. 6-12: […].
Deposition [Senior Vice President Product Management – Retail, Amazon Corporate LLC, US], 18 September 2014, p. 73 par. 25, p. 74 par. 1-7.
Deposition [Senior Vice President Product Management – Retail, Amazon Corporate LLC, US], 18 September 2014, p. 182 par. 1-4.
Deposition [Vice President and Country Manager Germany, Amazon Deutschland Services GmbH, Munich, Germany], 13 June 2014, p. 105, par. 25, p. 106, par. 1-15: […], Deposition [Vice President and Country Manager Germany, Amazon Deutschland Services GmbH, Munich, Germany], 13 June 2014, p. 107 par. 2-5: […].
Deposition [Vice President and Country Manager Germany, Amazon Deutschland Services GmbH, Munich, Germany], 13 June 2014, p. 102, par. 4-14. See also Deposition [Senior Vice President Product Management – Retail, Amazon Corporate LLC, US], 18 September 2014, p. 41: par. 22-25:[…].
Amazon's submission of 22 July 2016, p. 1.
Amazon's submission of 22 July 2016, Amazon's Technology-Centric E-tailing-Business, p. 4. Amazon provides the following example: ‘By way of illustration, a very large brick-and-mortar retailer might have tens of thousands products for sale: in contrast, Amazon's European websites offered nearly 3,7 million distinct products for sale in 2005 and around [20-30] million in 2013. A very successful brick-and-mortar retailer might process tens of thousands transactions each year: in 2005, Amazon's European websites processed nearly 71 million distinct orders, and that number grew to over [1-1,5] billion in 2013. It would simply not be possible to employ a sufficient number of individuals, for example, to determine the price on millions of unique products – let alone to decide what the in-stock levels should be for those products or individually to process every customer order.’
Amazon's submission of 22 July 2016, Amazon's Technology-Centric E-tailing-Business, p. 4.
Amazon's submission of 22 July 2016, Amazon's Technology-Centric E-tailing-Business, p. 3. The following example is provided: ‘While some functionality, such as, for example, identity, which allows customers to log on the website, or Item Master Service, which maintains a catalogue of all products sold on Amazon, has been provided since the very first days of Amazon's operations, the underlying technology would have been rewritten entirely (and continuously) over the years. [..] the identity technology used by Amazon in 2010 had little to do with the identity technology used prior to 2005 – the 2005 service has been disassembled and rewritten as a number of smaller, more manageable services that together provide the identity functionality, to adapt the technology to the evolution of the scope of Amazon's operations.’
Amazon's submission of 22 July 2016, Amazon's Technology-Centric E-tailing-Business, p. 4.
Amazon's submission of 22 July 2016, Amazon's Technology-Centric E-tailing-Business, p. 1.
The hardware technology is physical devices, in particular servers.
Amazon's submission of 22 July 2016, Amazon's Technology-Centric E-tailing-Business, p. 2-3.
Full Time Equivalent (FTE) is the hours worked by one employee on a full time basis.
Amazon's submission of 20 January 2017, p. 2-4; Amazon Internal Document: EU Policies and Procedures Manual, effective 1 May 2006.
Amazon's submission of 6 March 2017, Annex 28a.
Amazon's submission of 8 February 2017, p. 1-2 and Deposition [Director International Tax and Tax Policy, Amazon Corporate LLC, US], 24 April 2014, p. 200 par 23-201 par. 3:[…].
According to Amazon's submission of 8 February 2017, p. 1-3, LuxSCS and LuxOpCo concluded a Credit Facility Agreement of 29 December 2006 for cash management purposes. That agreement was subsequently amended and restated on 1 March 2007, 1 January 2009, 1 April 2011 and 1 January 2012.
‘Back-to-back-activity: EHT [LuxSCS] will lend its funds to AEU [LuxOpCo] on an interest-bearing basis, and AEU [LuxOpCo] will invest the funds.’ and ‘[…] all of the financing transactions existing between EHT [LuxSCS] and AEU [LuxOpCo] will be merged into one single debt instrument, which will have the characteristics of a Credit Facility.’ See Amazon's submission of 5 March 2015, Annex 22, p. 7.
Amazon's submission of 8 February 2017, p. 2.
LuxOpCo's annual accounts 2006-2013.
The definition of the Applicable Costs is set out in footnote 61.
The Service Agreements all contains identical provisions on the use of the Intangibles (section 3), on compensation (section 4), status and liabilities of the parties (section 5), confidentiality (section 6), term of agreement and termination (section 7), force majeure (section 8), general provisions (section 9). The definition of the Applicable Costs in Exhibit 1 is identical in all the Service Agreements.
Service Agreements, paragraph 2.1 (General).
Service Agreement between Amazon.fr. Sarl and LuxOpCo, paragraphs 2.2 (Fulfillment Services) and 2.3 (Customer and Merchant Services).
Service Agreement between Amazon.de GmbH and LuxOpCo, paragraphs 2.2 (Customer and Merchant Services) and 2.3 (Support Services).
Service Agreement between Amazon.fr Logistique SAS and LuxOpCo, paragraph 2.2 (Fulfillment Services).
Service Agreement between Amazon Logistik GmbH and LuxOpCo, paragraph 2.2 (Fulfillment Services).
Service Agreement between Amazon.co.uk Ltd and LuxOpCo, paragraphs 2.2 (Fulfillment Services), 2.3 (Customer and Merchant Services) and 2.4 (Support Services).
Service Agreements, paragraph 5.1 (No Agency).
Service Agreements, paragraph 5.2 (Provider Obligations).
Service Agreements, section 5 (Status and Liabilities of the Parties).
As explained in Section 2.3.2.1, Amazon has pointed to selection, price and convenience as the key drivers of its online retail business.
The applicable mark-up for Amazon.fr Sarl is [3-3,5] % for customer and merchant services and [5-10] % for support services. The applicable mark-up for Amazon.de GmbH is [3-3,5] % for customer and merchant services and [4-4,5] % for support services. The applicable mark-up for Amazon.fr Logistique SAS is [5-10] % for fulfilment services. The applicable mark-up for Amazon Logistik GmbH is [5-10] % for fulfilment services. The applicable mark-up for Amazon.co.uk Ltd is [3-3,5] % for fulfilment services, [3-3,5] % for customer and merchant services and [4-4,5] % for support services.
Amazon's submission of 7 June 2017, p 3: ‘These fees relate to (i) the share of Luxembourg costs allocated to LuxSCS and to (ii) disbursements in relation to the legal protection of the Intangibles owned by LuxSCS such as patent application fees and related disbursements, trademark application fees and related disbursements and fees and disbursements in relation to domain names and IP searches’.
The Buy-In was paid in seven instalments. The first instalment was paid in 2005 and amounted to USD 73,22 million (EUR 52,35 million).
As defined in the CSA, paragraph 1.10, the ‘Development Program’ means ‘the activities of a Party within the scope and principles set forth under Section 2.’ As specified in the CSA, section 2, paragraph 2.1, the Parties agree that ‘all research, development, marketing and other activities relating to the Licensed Purpose after the Effective Date are included within the scope of the Development Program. Such activities may include, but are not limited to, all development activities related to maintaining, improving, enhancing, or extending the Amazon Intellectual Property, A9 Intellectual Property and EHT Intellectual Property [together the Intangibles]. All such activities shall be included in the Development Program except to the extent specifically excluded by mutual, written agreement of the Parties’.
As defined in the CSA, paragraph 1.9, ‘Development Costs’ means ‘the costs incurred pursuant to Section 3 related to the performance of activities by a Party under the Development Program, including but not limited to any and all costs incurred by a Party in the course of developing Derivative Works.’ The Development Costs are determined in accordance with paragraph 3.3.
As set out in the CSA, paragraph 3.2 on ‘Subcontractor's Development Costs’: ‘Development Costs incurred by a person that participates at a Party's request in the development or improvement of the Amazon Intellectual Property, A 9 Intellectual Property and EHT Intellectual Property [together the Intangibles] (a ‘Subcontractor’) shall be considered Development Costs of that Party if the Party contracting for such work with such Subcontractor (a) materially participates in the management or control of the Subcontractor, and (b) retains ownership, or receives material rights to use, any intangible property developed by the Subcontractor’.
Such as trademarks, trade names, domain names, style, logos and presentation of Amazon.
Amazon's submission of 21 August 2015, Annex 12: CSA Annual Summary Reports.
CSA, section 4 and exhibit D (as effective of 5 January 2009).
Amazon's submission of 21 August 2015, Annex 12: CSA Annual Summary Reports.
Pursuant to the CSA, section 4 (Development Cost Allocation), an ‘Annual Cost Sharing Report’ was to be prepared to determine the yearly cost sharing payments from each party to the CSA. The Annual Cost Sharing Reports for the years 2005-2014 were provided by Amazon in its submission of 21 August 2015.
As calculated in accordance with the CSA, sections 4 (Development Cost Allocation) and 5 (Payments).
CSA, section 4.1: ‘As soon as practical after each Year End, the Parties shall each prepare necessary financial statements and forecasts, and shall jointly reconcile and consolidate such statements and forecasts into an ‘Annual Cost Sharing Report,’ containing the information required by this Section 4 and signed by the Parties […].’ Section 4 determines the Development Cost Allocation.
Amazon's submission of 27 February 2017, p. 4-5.
CSA, paragraph 8.1 (Initial Period).
CSA, paragraph 8.2 (Immediate Termination upon Notice for Change in Control or Substantial Encumbrance).
CSA, paragraph 8.3 (Termination After Failure to Cure for Failure of Performance).
Amazon's submission of 4 May 2015, Annex 2.
CSA, as effective as of 5 January 2009, paragraph 2.3: ‘In connection with this Agreement, each Party shall undertake the functions and risks specified in Exhibit B hereto’.
CSA, as effective as of 5 January 2009 exhibit В, Functions and Risks. It is in this respect stated in exhibit В that ‘[t]his list is representative of the functions and risks to be undertaken by the Parties. The Parties do not represent that this is the exclusive statement of functions and risks, and the omission of any function or risk does not imply that the Party does not perform such function or bear such risk’.
Amazon's submission of 27 February 2017.
Amazon's submission of 12 April 2017.
A notice of deficiency is an official letter, by means of which the IRS advises a taxpayer about delinquent taxes owed plus any penalties and interest. The notice contains an explanation of the tax adjustments, how they were computed and of the taxpayer's options. In particular, if the taxpayer disagrees with the assessment, he or she can file an appeal with the US Tax Court.
IRS (respondent) Trial Memorandum, p. 1.
Amazon Post trial brief, p. 6-7.
The IRS is authorised to issue a summons to any person having information that ‘may be relevant’ to its investigation. That authority permits the IRS to require a person to appear at a designated location and to produce books and records or give testimony under oath; cf. https://www.irs.gov/pub/irs-wd/0950044.pdf.
The US Tax Court judgement does not contain the ultimate quantification of the adjustments to Buy-in and CSA payments due from LuxSCS to the US.
CUT is a transfer pricing method used in the US analogous to the CUP under OECD TP Guidelines.
Amazon Final Transcripts: [Vice President Technology – Software Development, Amazon Corporate LLC, US former Vice President of Kindle, Amazon Corporate LLC, US], 18 November 2014, par. 3549: 10-25; par. 3550: 1-10, ‘Volume impacted deal pricing pretty significantly. You can look at the — you can go through the various contracts across the M.coms and you will find that the larger ones, such as [C] and [A], they have a lower commission rate than the smaller ones such as [D] and [E] and [F], and so that was a reality of what the market forces would require, […] And so the expectation that became predominant across all of the players in this market segment was that the bigger the sales volume, the lower the commission rate would be, and that found its way into, for example, [A] Amendment 3 is where we went from a single commission structure to a tiered base structure because [A] saw that their sales were doing very well and they predicted them to do very well over the course of the remainder of the agreement and they didn't want to be spending that much because they thought it wasn't competitive with their alternatives. And you saw the same thing in the [C] deal […].’
CSA, paragraph 1.4 (Amazon Intellectual Property)
Amazon's submission of 19 February 2016.
EUR 33 435 000 expensed directly in 2010.
Out of the total paid by LuxSCS for [acquisition Q]'s technology (USD 42 928 054), USD 22 928 054 was capitalised as intangible asset.
EUR 23 010 000 paid by LuxSCS for [acquisition T], were recorded as an intangible asset.
Out of the total paid by LuxSCS for [acquisition U] (USD 70 million), EUR 84 million was capitalised as goodwill and EUR 0,7 million as marketing-related intangible asset.
EUR [0-10 millions].
Amazon's submission of 12 January 2016.
Amazon's submission of 19 March 2015, Supplement.
Amazon's submission of 12 June 2015.
Amazon Final Transcripts: [Vice President Technology – Software Development, Amazon Corporate LLC, US former Vice President of Kindle, Amazon Corporate LLC, US], 18 November 2014, par. 3602: 3-25; par. 3603:1, ‘Q. M.com or enterprise solutions, in that program Amazon took all of the technologies that it had developed for its own website business […] and made them available to third-party retailers? […] Is that correct? A. That's a reasonable description. Q: Okay. And these third parties […] then used this technology to build and operate their own eCommerce system and website; is that correct? A: That's not quite correct. It was Amazon, my team specifically that took those technologies and assembled them, extended them, customised them and operated the technology day to day on behalf of that retailer. What the retailer would be doing is they would be managing their pricing, their promotions, their merchandising, their marketing, these elements […] we would be their IT and eCommerce department, but they would be what gets referred to as the merchandising and pricing and marketing department.’
Amazon's submission of 12 June 2015.
Amazon Final Transcripts: [Vice President Technology – Software Development, Amazon Corporate LLC, US former Vice President of Kindle, Amazon Corporate LLC, US], 18 November 2014, par. 3540: 24-25, par. 3541: 1-25, par. 3542: 1-25: ‘Q: […] And given that these deals involved services and technology, how did Amazon price them? A: Well, the way we priced these deals was essentially looking at them as a wholistic bundle […].’
Amazon's submissions of 31 July 2015 and 15 January 2016.
Amazon's submissions of 12 June 2015 and 15 January 2016.
[A] Agreement, section 4.4 (Pricing).
[A] Agreement, paragraph 14.4.1.1 (Trademarks) provides: ‘ACI hereby grants to [A], during the Term, a limited, non-exclusive, non-transferable (except in accordance with Section 22.7) license, which [A] may sublicense only to its Affiliates to use within the Territory such ACI Content and Trademarks supplied by ACI hereunder: (a) only within the Territory; (b) only as is reasonably necessary to perform its obligations under this Agreement; and (c) only for the purposes contemplated under this Agreement.’. [A] agreement, paragraph 14.4.1.2 (Limited License) provides: ‘ACI grants to [A], for a term ending on the earlier of: (a) August 31, 2006; or (b) twelve (12) months following any termination of the Term by [A] pursuant to Section 13.2, or six (6) months following any termination of the Term by [A] pursuant to Section 13.3.2, a limited, temporary, non-exclusive, non-transferable (except in accordance with Section 22.7) license to use the ACI Intellectual Property (excluding Trademarks, URLs and domain names of ACI and its Affiliates), solely as necessary to permit [A] to continue the operation, maintenance and support of the [A] Site (or any successor Web Site, whether hosted by [A] directly or by a Third Party) in the form such exists as of the effective date of any termination of this Agreement as provided above’.
[A] Agreement, section 14.4.2 ([A]).
[A] Agreement, section 11 (Customer Information and Other Data).
Exhibit S of the [A] Agreement.
Amazon's submission of 15 January 2016.
[G] Agreement, section 5.5 (Pricing of Selected Product Units) and 9.1 (Sale of Selected Product Units to Customers Through the ACT Site: Procedure).
[G] Agreement, section 16 (Proprietary Rights and Licenses, Restrictions).
[G] Agreement, section 13 (Compensation).
[H] Agreement, section 2.1 (Mirror Site: Development) of and [B] Agreement, section 2.1 (Mirror Site: Development).
[H] Agreement, section 5.2 (Existing Customer Information Delivery) and [B] Agreement, sections 5.2 (Existing Customer Information Delivery).
[H] Agreement, section 9.2 (Licenses) and [B] Agreement, section 10.2 (Licenses).
Amazon's submission of 12 June 2015.
Amazon's submission of 15 January 2016.
Amazon's submission of 22 January 2016.
[…] will pay a royalty to […]. However, if royalty payments result in remuneration […], the royalty will be adjusted […].
As provided in the License Agreement, paragraph 9.7 (Binding effect, Assignment), either party was entitled to assign its rights and obligations under this agreement without the other party's consent provided that the assignee is an Affiliate of the assignor.
The […] fee.
[…] fee to be paid by […].
[…] to earn a return on its costs to provide shares service of [1-10] % to [1-10] %.
According to the recital 39 a. of the 2014 APA request […].
2014 ruling request, 2 April 2014, par. 39 a, p. 11.
2014 ruling request, 2 April 2014, par. 39 c, p. 11.
Article 159(1) LIR: ‘Sont considérés comme contribuables résidents passibles de l'impôt sur le revenu des collectivités, les organismes à caractère collectif énumérés ci-après, pour autant que leur siège statutaire ou leur administration centrale se trouve sur le territoire du Grand-Duché.’ Article 159(2) LIR: ‘L'impôt sur le revenu des collectivités porte sur l'ensemble des revenus du contribuable’.
Article 160 LIR: ‘Sont passibles de l'impôt sur le revenu des collectivités pour leur revenu indigène au sens de l'article 156, les organismes à caractère collectif de l'article 159 qui n'ont ni leur siège statutaire, ni leur administration centrale sur le territoire du Grand-Duché’.
Article 156 LIR: ‘Sont considérés comme revenus indigènes des contribuables non-résidents: 1. le bénéfice commercial au sens des articles 14 et 15: a) lorsqu'il est réalisé directement ou indirectement par un établissement stable ou un représentant permanent au Grand-Duché, excepté toutefois lorsque le représentant permanent est négociant en gros, commissionnaire ou représentant de commerce indépendant’.
The Luxembourg corporate income tax consists of a corporate income tax on profits (‘impôt sur le revenue des collectivités’ or ‘IRC’), taxed at a rate of 21 %, and, for companies established in Luxembourg City, a municipal business tax on profits (‘impôt commercial communal’), taxed at a rate of 6,75 %. In addition, there is a 5 % surcharge on the 21 % tax rate for an employment fund calculated on the IRC. In 2012, the solidarity surcharge was increased from 5 % to 7 % with effect from tax year 2013. With the changes introduced for tax year 2013, the aggregate income tax rate increases from 28,80 % to 29,22 % for Luxembourg City. In addition, Luxembourg companies are subject to an annual net wealth tax, which is levied at a rate of 0,5 % on the company's worldwide net worth on 1 January of each year.
The application of Article 164(3) LIR to financing companies has been clarified by the Luxembourg tax administrations in Circulars no. 164/2 of 28 January 2011 and no. 164/2bis of 8 April 2011, which were replaced by Circulaire du directeur des contributions LIR no 56/1 – 56bis/1 du 27 décembre 2016, traitement fiscal des sociétés exerçant des transactions de financement intra-groupe.
See Recital 294.
Circular Letter LIR no 164/2 of 28 January 2011, p. 2.
Luxembourg has been a member of the OECD since 7 December 1961.
See, for example, 1995 OECD TP Guidelines, preface, paragraph 16: ‘OECD Member countries are encouraged to follow these Guidelines in their domestic transfer pricing practices, and taxpayers are encouraged to follow these Guidelines in evaluating for tax purposes whether their transfer pricing complies with the arm's length principle […]’.
The most recent version was published by the OECD on 15 July 2014.
In this context, ‘transfer prices’ refer to the prices at which a company transfers physical goods or intangible property or provides services to its associated companies. 1995, 2010 and 2017 OECD TP Guidelines, preface, paragraph 11.
See, 1995 OECD TP Guidelines, paragraph 1.13; See also, 2010 and 2017 OECD TP Guidelines, paragraph 1.14.
The separate entity approach is explained in the preface to the OECD TP Guidelines, paragraph 6: ‘In order to apply the separate entity approach to intra-group transactions, individual group members must be taxed on the basis that they act at arm's length in their dealings with each other. However, the relationship among members of an MNE [multinational enterprise] group may permit the group members to establish special conditions in their intra-group relations that differ from those that would have been established had the group members been acting as independent enterprises operating in open markets. To ensure the correct application of the separate entity approach, OECD Member countries have adopted the arm's length principle, under which the effect of special conditions on the levels of profits should be eliminated.’ See also the 2010 OECD TP Guidelines, paragraph 1.6.
OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations 2017 as published 10 July 2017. Later changes and additions to the commentaries and guidelines related to the OECD Model Tax Convention, which do not lead to a change of the wording of the Convention itself, are considered to be applicable to the interpretation of the articles set out therein. The rationale for this approach is that the OECD commentaries and guidelines, including the 1995 and 2010 OECD TP Guidelines, are considered to capture the international consensus on the application of the principles set out in the OECD Model Tax Convention, see also OECD Model Tax Convention Commentary, 2010, para. 35.
OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations, 22 July 2010.
OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations, 13 July 1995. These Guidelines were based on the OECD Report ‘Transfer Pricing and Multinational Enterprises (1979)’.
The 2017 OECD TP Guidelines reflect the clarifications and revisions agreed in the 2015 BEPS Reports on Actions 8-10 Aligning Transfer pricing Outcomes with Value Creation and on Action 13 Transfer Pricing Documentation and Country-by-Country Reporting. It also includes the revised guidance on safe harbours approved in 2013 which recognises that properly designed safe harbours can help to relieve some compliance burdens and provide taxpayers with greater certainty. Finally, this edition also contains consistency changes that were made to the rest of the OECD TP Guidelines.
The report was published on 5 October 2015 and approved by the OECD Council on 23 July 2016.
OECD (2015), Aligning Transfer Pricing Outcomes with value Creation, Actions 8-10 – 2015 Final Reports, BEPS Project, Revisions to Chapter VI of the Transfer Pricing Guidelines.
OECD (2015) Aligning Transfer Pricing Outcomes with value Creation, Actions 8-10 – 2015 Final Reports, BEPS Project, Revisions to Chapter VIII of the Transfer Pricing Guidelines.
1995 OECD TP Guidelines, chapter II, 2010 and 2017 OECD TP Guidelines, part II.
1995 OECD TP Guidelines, paragraph 1.69, provides that ‘[i]n such cases, an attempt should be made to reach a conclusion consistent with the arm's length principle that is satisfactory from a practical viewpoint to all the parties involved, taking into account the facts and circumstances of the case, the mix of evidence available, and the relative reliability of the various methods under consideration’.
1995 OECD TP Guidelines, paragraph 1.68; 2010 and 2017 OECD TP Guidelines, paragraph 2.9. In this respect, 2010 and 2017 OECD TP Guidelines, paragraph 2.9 stresses that ‘[s]uch other methods should however not be used in substitution for OECD-recognised methods where the latter are more appropriate to the facts and circumstances of the case’.
1995 OECD TP Guidelines, chapter II and III; 2010 and 2017 OECD TP Guidelines, part II and III.
1995 OECD TP Guidelines, paragraph 3.49 provides: ‘Traditional transaction methods are to be preferred over transactional profit methods as a means of establishing whether a transfer price is at arm's length, i.e. whether there is a special condition affecting the level of profits between associated enterprises. To date, practical experience has shown that in the majority of cases, it is possible to apply traditional transaction methods.’ 2010 and 2017 OECD TP Guidelines, paragraph 2.3 provides: ‘As a result, where, taking account of the criteria described at paragraph 2.2, a traditional transaction method and a transactional profit method can be applied in an equally reliable manner, the traditional transaction method is preferable to the transactional profit method’.
1995 OECD TP Guidelines; paragraph 2.7: ‘Where it is possible to locate comparable uncontrolled transactions, the CUP Method is the most direct and reliable way to apply the arm's length principle. Consequently, in such cases the CUP Method is preferable over all other methods.’ See also 2010 OECD TP Guidelines, paragraph 2.14 and 2017 OECD TP Guidelines, paragraph 2.15.
1995 OECD TP Guidelines; paragraph 2.7: ‘Following the principles in Chapter I, an uncontrolled transaction is comparable to a controlled transaction (i.e. it is a comparable uncontrolled transaction) for purposes of the CUP method if one of two conditions is met: a) none of the differences (if any) between the transactions being compared or between the enterprises undertaking those transactions could materially affect the price in the open market; or, b) reasonably accurate adjustments can be made to eliminate the material effects of such differences’. See also the 2010 OECD TP Guidelines, paragraph 2.14 and the 2017 OECD TP Guidelines, paragraph 2.15.
1995 OECD TP Guidelines, paragraph 3.2; 2010 OECD TP Guidelines, paragraph 2.58; and 2017 OECD TP Guidelines, paragraph 2.64.
As explained in paragraph 2.80 of the 2010 OECD TP Guidelines, the determination of the profit level indicator should exclude non-operating items such as interest income, expenses and income taxes Exceptional and extraordinary items of a non-recurring nature should generally also be excluded.
1995, 2010 and 2017 OECD TP Guidelines, Glossary.
2010 OECD TP Guidelines, paragraph 3.18 provides for the following recommendation: ‘When applying a cost plus, resale price or transactional net margin method as described in Chapter II, it is necessary to choose the party to the transaction for which a financial indicator (mark-up on costs, gross margin, or net profit indicator) is tested. The choice of the tested party should be consistent with the functional analysis of the transaction. As a general rule, the tested party is the one to which a transfer pricing method can be applied in the most reliable manner and for which the most reliable comparables can be found, i.e. it will most often be the one that has the less complex functional analysis.’ See also, 2017 OECD TP Guidelines, paragraph 6.198: ‘In a transfer pricing analysis where the most appropriate transfer pricing method is the resale price method, the cost-plus method, or the transactional net margin method, the less complex of the parties to the controlled transaction is often selected as the tested party. In many cases, an arm's length price or level of profit for the tested party can be determined without the need to value the intangibles used in connection with the transaction. That would generally be the case where only the non-tested party uses intangibles’.
As stated in the 1995 OECD TP Guidelines, paragraph 6.26: ‘In cases involving highly valuable intangible property, it may be difficult to find comparable uncontrolled transactions. It therefore may be difficult to apply the traditional transaction methods and the transactional net margin method, particularly where both parties to the transaction own valuable intangible property or unique assets used in the transaction that distinguish the transaction from those of potential competitors. In such cases the profit split method may be relevant although there may be practical problems in its application.’ As further explained in the 2010 OECD TP Guidelines, paragraph 2.59: ‘A transactional net margin method is unlikely to be reliable if each party to a transaction makes valuable, unique contributions […] In such a case, a transactional profit split method will generally be the most appropriate method,[…]. However, a one-sided method (traditional transaction method or transactional net margin method) may be applicable in cases where one of the parties makes all the unique contributions involved in the controlled transaction, while the other party does not make any unique contribution’.
1995, 2010 and 2017 OECD TP Guidelines, Glossary.
1995 OECD TP Guidelines, paragraph 3.7; 2010 OECD TP Guidelines, paragraphs 2.109 and 2.115.
1995 OECD TP Guidelines, paragraphs 1.45 to 1.48, 2010 and 2017 OECD TP Guidelines, paragraphs 3.55 to 3.62.
Quartiles in a series of data are three points which divide the figures in the set ranked from smallest to largest into four equally populated sets, that is 25 % of the data is in the 25th percentile (also called lower quartile), 50 % of the data is below or equal to the second quartile, which is the median of the set, and 75 % of the data is below or equal to the 75th percentile (also called upper quartile).
1995 OECD TP Guidelines, paragraph 1.48, 2010 and 2017 OECD TP Guidelines, paragraph 3.62.
2017 OECD TP Guidelines, Chapter VI, and BEPS Actions 8-10 Final Report, p. 63-117.
1995 and 2010 OECD TP Guidelines, paragraph 6.14, 2017 OECD TP Guidelines, paragraph 6.112.
This focus is further confirmed in the 2017 OECD TP Guidelines, paragraph 6.42: ‘While determining legal ownership and contractual arrangements is an important first step in the analysis, these determinations are separate and distinct from the question of remuneration under the arm's length principle. For transfer pricing purposes, legal ownership of intangibles, by itself, does not confer any right ultimately to retain returns derived by the MNE [multinational enterprise] group from exploiting the intangible, even though such returns may initially accrue to the legal owner as a result of its legal or contractual right to exploit the intangible. The return ultimately retained by or attributed to the legal owner depends upon the functions it performs, the assets it uses, and the risks it assumes, and upon the contributions made by other MNE [multinational enterprise] group members through their functions performed, assets used, and risks assumed’.
2017 OECD TP Guidelines, Chapter VI, and BEPS Actions 8-10 Final Report, p. 141-160.
1995, 2010 and 2017 OECD TP Guidelines, paragraph 7.2.
1995, 2010 and 2017 OECD TP Guidelines, paragraph 7.29.
1995, 2010 and 2017 OECD TP Guidelines, paragraphs 7.9 and 7.10.
EU Joint Transfer Pricing Forum, JTPF report: Guidelines on low value adding intra-group services, meeting of 4 February 2010, available at: https://ec.europa.eu/taxation_customs/sites/taxation/files/docs/body/jtpf_020_rev3_2009.pdf.
2010 JTPF report, paragraphs 59-60.
2010 JTPF report, paragraph 62.
For completeness it is noted that a portion of the labour costs can be included in COGS, when it is directly associated with the production.
See Recital 38 of the Opening Decision.
In Table 17, EBITDA stands for the conventional acronym of ‘earnings before interest, taxes, depreciation and amortisation’.
The Commission's decision of 7 October 2014 to initiate the procedure laid down in Article 108(2) of the Treaty on the Functioning of the European Union, C(2014) 7156 final.
0,45 % and 0,55 % on European turnover respectively, as illustrated in Figure 1.
Previously, Article 10(2) of Regulation (EC) No 659/1999.
In its submission of 21 November 2014, par. 43, Luxembourg refers to the report of the Code of Conduct Group on Business Taxation, presented to the Council on 27 May 2011: ‘With respect to the Luxembourg tax measure concerning companies engaged in intra-group financing activities the Group discussed the agreed description at the meeting on 17 February 2011. Luxembourg informed the Group that Circular no. 164/2 dated 28 January 2011 determines the conditions for providing advance pricing agreements confirming the remuneration of the transactions. […] With the benefit of this information, the Group agreed that there was no need for this measure to be assessed against the criteria of the Code of Conduct’.
Luxembourg's submission of 21 November 2014, par. 44: ‘At its meeting on 6 December 2011, the OECD Forum on Harmful Tax Practices agreed that 10 systems did not have to be subject to further examination, one of which was the advance tax analysis of intra-group financing carried out in Luxembourg’.
In its submission of 21 November 2014, par. 73, Luxembourg refers to the Commission Decision in case SA.32225 of 2 October 2013: Expropriation compensation of Nedalco in Bergen op Zoom.
Case T-219/10 Autogrill España v Commission ECLI:EU:T:2014:939, paragraphs 44 and 45.
By letter of 5 December 2004 Amazon informed Luxembourg that the restructuring would be completed only in 2006 and asked for the contested tax ruling to be applicable for the first five years as of then. On 23 December 2004, Luxembourg confirmed that the described delay does not affect the agreement of 6 November 2003, provided that other stipulations of the request of 23 October 2003 are maintained.
Amazon refers to the following State aid cases where, according to Amazon, a particular tax rule served as the reference framework: Commission Decision 2011/282/EU of 12 January 2011 on the tax amortisation of financial goodwill for foreign shareholding acquisitions No C 45/07 (ex NN 51/07, ex CP 9/07) implemented by Spain (OJ L 135, 21.5.2011, p. 1); Commission Decision 2007/256/EC of 20 December 2006 on the aid scheme implemented by France under Article 39 CA of the General Tax Code — State aid C 46/2004 (ex NN 65/2004) (OJ L 112, 30.4.2007, p. 41), paragraph 86; Case C-6/12, P Oy, paragraphs 22-31; Joined Cases C-78/08 to C-80/08, Paint Graphos, paragraph 50.
Reference is made to Decision 2011/282/EU and Commission Decision 2011/276/EU of 26 May 2010 concerning State aid in the form of a tax settlement agreement implemented by Belgium in favour of Umicore SA (formerly known as Union Minière SA) (State aid C 76/2003 (ex NN 69/2003)) (OJ L 122, 11.5.2011, p. 76), in particular paragraphs 204 and 223.
Amazon's submission of 5 March 2015, Annex 2.
In particular, in Amazon's submission of 5 March 2015, par. 43 to 45 and 49: Amazon refers to Joined Cases C-106/09 P and C-107/99 P Commission and Spain v Government of Gibraltar and United Kingdom, para. 72 and 73 and the case-law cited; Case C-6/12, P Oy, paragraph 17-19, case T-219/10 Autogrill, paragraph 29; and Case C-88/03, Portugal v Commission, paragraph 54 and the case law cited.
Amazon illustrates this argument with reference to the tax rulings issued by Luxembourg and published by ICIJ. Among them Amazon identified 97 rulings, which, according to Amazon, are based on the residual profit split method and within financing arrangements allocate a non-unique return, i.e. fixed financial margin to a Luxembourg entity, while the residual profit is allocated to the holder of a financing instrument.
Amazon's submission of 5 March 2015, par. 97.
Amazon's submission of 18 January 2016, p. 6.
Amazon's submission of 5 March 2015, par. 9.
[Advisor 4], ‘Benchmark Company Search for European Management Companies for 2010-2012’, 5 February 2014. Annex 11 to Amazon's comments to the Opening Decision.
The tax advisor limited the search to following countries: Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Netherlands, Portugal, Spain, Sweden and United Kingdom.
Following keyword search terms were used: management services, business management consultancy services, strategic consulting services, organisational planning services and other related services. At the same time, the tax advisor excluded companies, which provide unrelated services (such as auditing, actuarial, advertising, brokering, communication, construction, designing and developing, manufacturing, IT, real estate and transportation services), operated as partnerships, operated in a dissimilar industry (utility and energy) and had insufficient qualitative information).
Adix, Axholmen Ab, Becitizen, Consilia Business Management Spa, Icm Intercultural Management Associates, Implement Mp Ab, Nike Consulting Spa, Nsa S.P.A., Pambianco Strategie Di Impresa Srl, Rhapsodies Conseil, X-Pm Transition Partners.
Total revenue minus total costs, where total costs equal total cost of goods sold plus total operating expense.
Amazon's submission of 18 January 2016, p. 6.
Amazon's submission of 5 March 2015, Annex 14: [Advisor 2], ‘[Advisor 2] roll-forward analysis’.
Amazon refers to the France Telecom case (Commission Decision 2006/621/EC of 2 August 2004 on the State Aid implemented by France for France Télécom (OJ L 257, 20.9.2006, p. 11), paragraph 263, where the Commission refrained from recovery on the basis of novelty of the measure.
EPICENTER describes itself as an independent initiative of six leading think tanks across the European Union. It seeks to inform the EU policy debate and promote the principles of a free society by bringing together the economic expertise of its members.
Amazon's submission of 18 January 2016, p. 8. As provided in that submission ‘[..] it is highly unlikely that Lux SCS would have been able to find an independent entity capable or willing enter into a licensing agreement if doing so entailed that the business risk would be supported by that independent entity. Accordingly, Lux SCS was ready to take the risks in relation to the Intangibles, so as to enable LuxOpCo to gain more easily market shares: in the longer term growing revenue for LuxOpCo would mean more revenue for Lux SCS, as licensor. In practical terms, this meant entering into a contractual agreement where the royalty methodology is based on the licensee's being profitable and earning a return on its costs, rather than an arrangement that would create a risk of the licensee being loss making’.
Amazon's submission of 18 January 2016, p. 11.
Amazon's submission of 18 January 2016. As further explained by Amazon: ‘Considering those circumstances, it was indeed rational for both parties to agree on a remuneration on the basis that the risks were borne by the licensor and the licensee received a return on costs, as this would incentivize the licensee to grow as quickly as possible, both in terms of geographies and product lines, and to maximize selection (rather than concentrate only on higher margin product lines)’.
TP Report, p. 50.
Amazon's submission of 15 February 2016, Annex H.
Amazon's submission of 15 February 2016, p. 4.
Companies Algoriel, Decade, Seresco SA and Societe de Gestion de Terminaux Informatiques.
Company Solutec.
TP Report, p. 32.
In Amazon's submission of 18 January 2016, p. 11, Amazon further explains that ‘[..] it was logical that the royalty contained a floor based on a percentage of royalties, which incentivized the licensee to maximize revenues (and share in the upside of doing so). The corollary to that was a cap on the licensee's remuneration (based on a higher percentage of revenues) to ensure that the costs of the licensee were efficiently managed and did not increase too far out of line with revenue growth’.
See: http://www.amazon.com/Careers-Homepage/b?ie=UTF8&node=239364011.
Amazon's submission of 22 July 2016: Amazon's Technology-Centric E-tailing-Business, p. 1.
As explained in this submission, p. 5, this calculation was made by [Advisor 1] in the 2017 ex post TP report. GMS stands for Gross Merchandise Sales, which is total sales through Amazon's websites, i.e. sales in Amazon's own name and sales by third parties through Marketplace.
Amazon's submission of 29 May 2017: [Advisor 1] and [Advisor 1]: ‘Economic analysis of the Transfer Pricing approach adopted in the 2003 ATC’, 25 May 2017.
TP Report, p. 25-28, a royalty within a range of [10-15] % to [10-15] %, was considered arm's length. 2017 ex post TP-report, p. 12: ‘LuxOpCo's aggregate royalty payments to LuxSCS over the period under review are approximately [5-10] % of net sales (or [3-3,5] % of GMS). This figure is well below the range of royalty rates indicated by the CUP analysis in the [Advisor 2] Report, which are based on the agreement between Amazon and [A] and include adjustments to account for other intangibles (customer referrals) licensed by LuxSCS to LuxOpCo but not made available by Amazon to [A].’
2017 ex post TP Report, p. 13: ‘The tax court relied on Amazon's uncontrolled transactions with its M.com business partners for website technology, external trademark comparables for marketing intangibles, and Amazon's uncontrolled transactions for customer referral fees under the Associates and Syndicated Stores programs for customer information’.
2017 ex post TP Report, p. 12-13. According to Table 1, the royalty rate is an aggregate of the following royalty rates: Technology [3-3,5] %, Marketing Intangibles [1-1,5] %, and Customer Information [0,5-1] % of GMS. The buy-in payment for the customer information determined by the US Tax Court was converted by [Advisor 1] into a royalty rate proportionately to the value of the technology and marketing intangibles.
2017 ex post TP Report, p. 12-13.
2017 ex post TP Report, p. 15-16.
2017 ex post TP Report, p. 13: ‘The license of the Intangibles from LuxSCS to LuxOpCo is different, as the license comes with a commitment by LuxSCS to maintain, update, and enhance those intangibles through ongoing investments under the CSA. Although it is recognized that there is a decay of intangibles over time, these intangibles are replaced by new intangibles from the ongoing investments under the CSA and therefore, no downward adjustment to the royalty paid by LuxOpCo to LuxSCS is necessary’.
2017 ex post TP Report, p. 16. By contrast, the 2017 ex post TP report appears to ignore the functional analysis in its application of the CUP method although the functional analysis is considered a determining factor in the comparability analysis; see the 1995 OECD TP Guidelines, paragraph 1.20.
2017 ex post TP Report, p. 32.
2017 ex post TP Report, p. 30.
2017 ex post TP Report, p. 33.
2017 ex post TP Report, p. 33.
2017 ex post TP Report, p. 33.
Joined Cases C-20/15 P Commission v World Duty Free ECLI:EU:C:2016:981, paragraph 53 and the case-law cited.
See Joined Cases C-106/09 P and C-107/09 P Commission v. Government of Gibraltar and United Kingdom ECLI:EU:C:2011:732, paragraph 72 and the case-law cited.
Case C-494/06 P Commission v Italy and Wam ECLI:EU:C:2009:272, paragraph 54 and the case-law cited. See also Case C-66/02 Italy v Commission ECLI:EU:C:2005:768, paragraph 112.
Case C-126/01 GEMO SA ECLI:EU:C:2003:622, paragraph 41 and the case-law cited.
Case 730/79 Phillip Morris ECLI:EU:C:1980:209, paragraph 11. Joined Cases T-298/97, T-312/97 etc. Alzetta ECLI:EU:T:2000:151, paragraph 80.
Case C-172/03 Heiser ECLI:EU:C:2005:130, paragraph 55. See also C-271/13 P Rousse Industry v Commission ECLI:EU:C:2014:175, paragraph 44; Joined Cases C-71/09 P, C-73/09 P and C-76/09 P Comitato ‘Venezia vuole vivere’ and Others v Commission ECLI:EU:C:2011:368, paragraph 136; Case C-156/98 Germany v Commission ECLI:EU:C:2000:467, paragraph 30, and the case-law cited.
Case C-15/14 P Commission v MOL ECLI:EU:C:2015:362, paragraph 60. See also Joined C-20/15 P and C-21/15 P Commission v. World Duty Free Group ECLI:EU:C:2016:981, paragraph 55 and Case C-270/15 P Belgium v Commission ECLI:EU:C:2016:489, paragraph 49.
Case C-211/15 P Orange v. Commission ECLI:EU:C:2016:798, paragraphs 53 and 54.
Case C-143/99 Adria-Wien Pipeline and Wietersdorfer & Peggauer Zementwerke ECLI:EU:C:2001:598, paragraph 41.
Case 173/73 Italy v. Commission ECLI:EU:C:1974:71, paragraph 13.
See Case C-66/02 Italy v Commission ECLI:EU:C:2005:768, paragraph 78; Case C-222/04 Cassa di Risparmio di Firenze and Others ECLI:EU:C:2006:8, paragraph 132; Case C-522/13 Ministerio de Defensa and Navantia ECLI:EU:C:2014:2262, paragraphs 21 to 31.
See Joined Cases C-182/03 and C-217/03 Belgium and Forum 187 v. Commission ECLI:EU:C:2005:266, paragraph 95.
That the focus in transfer pricing is on the pricing of intra-group transactions clearly follows from paragraph 1.6 of the 2010 OECD TP Guidelines: ‘Because the separate entity approach treats the members of an MNE [multinational enterprise] group as if they were independent entities, attention is focused on the nature of the transactions between those members and on whether the conditions thereof differ from the conditions that would be obtained in comparable uncontrolled transactions. Such an analysis of the controlled and uncontrolled transactions, which is referred to as a ‘comparability analysis’, is at the heart of the application of the arm's length principle’. This focus on the pricing of intra-group transactions is reaffirmed in Par. 1.33 of the 2010 OECD TP Guidelines 2010: ‘Application of the arm's length principle is generally based on a comparison of the conditions in a controlled transaction with the conditions in transactions between independent enterprises. […]’.
See Joined Cases C-182/03 and C-217/03 Belgium and Forum 187 v. Commission ECLI:EU:C:2005:266, paragraph 95.
Amazon's submission of 5 March 2015, paragraph 27.
1995 OECD TP Guidelines, paragraph 1.12, 2010 and 2017 OECD TP Guidelines, paragraph 1.13.
Luxembourg's submission of 21 November 2014, par. 38 to 40.
Case 173/73 Italy v Commission ECLI:EU:C:1974:71.
See Joined Cases C-182/03 and C-217/03 Belgium and Forum 187 ASBL v. Commission ECLI:EU:C:2006:416, paragraph 81; Joined Cases C-106/09 P and C-107/09 P Commission v Government of Gibraltar and United Kingdom ECLI:EU:C:2011:732; Case C-417/10 3M Italia ECLI:EU:C:2012:184, paragraph 25, and Order in Case C-529/10 Safilo ECLI:EU:C:2012:188, paragraph 18.
See Recital 429.
See 1995 OECD TP Guidelines, paragraph 1.20. See also 2010 OECD TP Guidelines, paragraph 1.42 and 2017 OECD TP Guidelines, paragraph 1.51.
The TP report only provides the inaccurate statement that the residual profit ‘may be considered to be attributable to the Intangibles licensed by LuxOpCo from LuxSCS’.
2017 ex post TP report p. 21 and 32.
Amazon's submission of 7 June 2017.
It is therefore incorrect when Amazon claims that the control over exploitation of the Intangibles effectively lies with LuxSCS because the Intangibles could be licensed to another company in a scenario where LuxOpCo was loss-making. See Recital 321.
License Agreement, paragraphs 1.5 (Licensed Purpose), 2.1(a) (Exclusive Intellectual Property License Grant), 2.1(b) (Derivative Works), 2.3 (Maintenance), 4.1 (Term) and paragraph 9.2 (Preventing Infringement).
License Agreement, paragraph 2.1(a) (Exclusive Intellectual Property License Grant).
License Agreement, paragraph 9.2 (Preventing Infringement). Amazon confirmed this reading of Provision 9.2 in its submission of 7 June 2017, see p. 2.
License Agreement, paragraph 9.5 (Compliance, Data Protection).
The Licensed Purpose of the License Agreement is identical with the Licensed Purpose of the CSA in relation to the licenses obtained by LuxSCS. See the CSA, paragraph 1.13 (a).
To the extent, derivative works was not subject to assignment to LuxSCS under the Agreement, LuxSCS obtained an irrevocable, exclusive, and royalty-free worldwide license to those derivative works, including a right to sublicense these, for the entire lifetime of the Intangibles. Any assignment or license of the derivative works shall, however, at the same time remained licensed to LuxOpCo which, under the License Agreement is granted an irrevocable and exclusive license to the Intangibles and all other IP held by LuxSCS within the European territory. License Agreement, paragraphs 1.5 (Licensed Purpose), 2.1(a) (Exclusive Intellectual Property License Grant), 2.1(b) Derivative Works.
See Recital 124.
See Recital 124. See Amazon's submission of 31 October 2003. See also financial accounts of LuxSCS and EU Policies and Procedures Manual, which stipulates that LuxSCS ‘must never have any employees’. In its submission of 19 March 2015, Amazon indicated that the Amazon group employees involved in developing and maintaining the Intangibles are neither employed by LuxSCS nor by entities that participate in LuxSCS.
During the relevant period, LuxSCS also held shares in Amazon Eurasia Holdings Sarl.
See Recital 104 and footnote 27.
See Recitals 454-455.
Indeed Amazon confirmed that ‘neither [LuxSCS], not its general partner, Amazon Europe Holding Inc., had an active role in the IP Steering Committee’. See Amazon's submission of 7 June 2017, p. 1. As explained in Recital 103, Amazon Europe Holding Inc. was also acting as the sole manager of LuxSCS during the relevant period.
Written resolution of the sole manager of LuxSCS of 28 April 2006, see Table 14.
See Recitals 104 and 218.
CSA, paragraphs 1.13 (Licensed Purpose), 2.3 and Exhibit B, and paragraph 9.12 (Preventing Infringement). See also CSA, p. 1, ‘the Parties desire to pool their respective resources from the Effective Date forward, for the purpose of further developing and otherwise enhancing the value of the Amazon Intellectual Property [Intangibles owned by ATI], A9 Intellectual Property [Intangibles owned by A9] and EHT Intellectual Property [Intangibles owned by LuxSCS] (as defined below), and to share the costs and risks of developing and using all such intellectual property rights developed by any Party on the basis of benefits anticipated to be derived from such intellectual property rights’.
See Recital 213 as regards the acquisition of [acquisition U, Q, R and T].
See Recitals 212 to 214 and 218.
See Footnote 199.
See Recital 200.
See Recital 201.
As explained in footnote 402, the parties entered into the CSA in order to share their individual costs and risks for them to be able to obtain the benefits of their joint development of the Intangibles.
As illustrated in the accounts of LuxSCS, no trace has been found that A9, ATI, or any other Amazon companies have been remunerated for R & D and the management of the Intangibles beyond the CSA, nor for other services beyond the CSA (see Table 9). It is therefore assumed that the CSA set out the full remuneration to A9 and ATI for all functions performed for the benefit of LuxSCS.
See Footnote 198.
See 2010 OECD TP Guidelines, paragraph 9.24: ‘While it is not necessary to perform the day-to-day monitoring and administration functions in order to control a risk (as it is possible to outsource these functions), in order to control a risk one has to be able to assess the outcome of the day-to-day monitoring and administration functions by the service provider (the level of control needed and the type of performance assessment would depend on the nature of the risk).’ As further clarified in the BEPS action 8-10 Final report, p. 63: ‘If an associated enterprise contractually assuming a specific risk does not exercise control over that risk nor has the financial capacity to assume the risk, then the framework contained in the chapter ‘Guidance on Applying the Arm's Length Principle’ determines that the risk will be allocated to another member of the MNE [multinational enterprise] group that does exercise such control and has the financial capacity to assume the risk. This control requirement is used in this chapter to determine which parties assume risks in relation to intangibles, but also for assessing which member of the MNE [multinational enterprise] group in fact controls the performance of outsourced functions in relation to the development, enhancement, maintenance, protection and exploitation of the intangible.’ See also 2017 OECD TP Guidelines, paragraph 1.65: ‘Control over risk involves the first two elements of risk management defined in paragraph 1.61; that is (i) the capability to make decisions to take on, lay off, or decline a risk-bearing opportunity, together with the actual performance of that decision-making function and (ii) the capability to make decisions on whether and how to respond to the risks associated with the opportunity, together with the actual performance of that decision-making function. It is not necessary for a party to perform the day-to-day mitigation, as described in (iii) in order to have control of the risks. Such day-to-day mitigation may be outsourced, as the example in paragraph 1.63 illustrates. However, where these day-to-day mitigation activities are outsourced, control of the risk would require capability to determine the objectives of the outsourced activities, to decide to hire the provider of the risk mitigation functions, to assess whether the objectives are being adequately met, and, where necessary, to decide to adapt or terminate the contract with that provider, together with the performance of such assessment and decision-making. In accordance with this definition of control, a party requires both capability and functional performance as described above in order to exercise control over a risk’.
See 2017 OECD TP Guidelines, paragraph 6.53: ‘In outsourcing transactions between independent enterprises, it is usually the case that an entity performing functions on behalf of the legal owner of the intangible that relate to the development, enhancement, maintenance, protection, and exploitation of the intangible will operate under the control of such legal owner (as discussed in paragraph 1.65). […]’.
See paragraph 6.14 of the 1995 and 2010 OECD TP Guidelines: ‘Arm's length pricing for intangible property must take into account for the purposes of comparability the perspective of both the transferor of the property and the transferee. […] Given that the licensee will have to undertake investments or otherwise incur expenditures to use the licence it has to be determined whether an independent enterprise would be prepared to pay a licence fee of the given amount considering the expected benefits from the additional investments and other expenditures likely to be incurred’. Paragraph 6.18 further provides: ‘It also is important to take into account the value of services such as technical assistance and training of employees that the developer may render in connection with the transfer. Similarly, benefits provided by the licensee to the licensor by way of improvements to products or processes may need to be taken into account’. See also 2017 OECD TP Guidelines, paragraph 6.112.
See Recital 206.
As specified in Recital 429.
As set out in the License Agreement, paragraphs 2.3 (maintenance), 9.2 (preventing infringement) and 9.5 (compliance, data protection), LuxOpCo was solely responsible for the maintenance and protection of the Intangibles.
See Amazon's submission of 21 August 2015, annex 5.
Amazon's submission of 7 June 2017.
That the emphasis is on the use of an intangible is made clear in 2017 OECD TP Guidelines, paragraph 6.71 provides: ‘If the legal owner of an intangible in substance:
performs and controls all of the functions [..] related to the development, enhancement, maintenance, protection and exploitation of the intangible;
provides all assets, including funding, necessary to the development, enhancement, maintenance, protection, and exploitation of the intangibles; and
assumes all of the risks related to the development, enhancement, maintenance, protection, and exploitation of the intangible,
then it will be entitled to all of the anticipated, ex ante, returns derived from the MNE [multinational enterprise] group's exploitation of the intangible. To the extent that one or more members of the MNE [multinational enterprise] group other than the legal owner performs functions, uses assets, or assumes risks related to the development, enhancement, maintenance, protection, and exploitation of the intangible, such associated enterprises must be compensated on an arm's length basis for their contributions. This compensation may, depending on the facts and circumstances, constitute all or a substantial part of the return anticipated to be derived from the exploitation of the intangible’. See also 1995 OECD TP Guidelines, paragraph 1.20 and 1.22 2010 OECD TP Guidelines, paragraph 1.42, and 1.44 where the emphasis is clearly on the ‘use’ of the asset.
As explained in the 1995 OECD TP Guidelines, paragraph 2.26: ‘If it cannot be demonstrated that the intermediate company either bears a real risk or performs an economic function in the chain that has increased the value of the goods, then any element in the price that is claimed to be attributable to the activities of the intermediate company would reasonably be attributed elsewhere in the MNE [multinational enterprise] group, because independent enterprises would not normally have allowed such a company to share in the profits of the transaction.’ See also 2010 OECD TP Guidelines, paragraph 2.33 and 2017 OECD TP Guidelines, paragraph 2.39. As further explained in the 2017 OECD TP Guidelines, paragraph 6.59: ‘Group members that use assets in the development, enhancement, maintenance, protection, and exploitation of an intangible should receive appropriate compensation for doing so. Such assets may include, without limitation, intangibles used in research, development or marketing (e.g. know-how, customer relationships, etc.), physical assets, or funding. One member of an MNE [multinational enterprise] group may fund some or all of the development, enhancement, maintenance, and protection of an intangible, while one or more other members perform all of the relevant functions. When assessing the appropriate anticipated return to funding in such circumstances, it should be recognised that in arm's length transactions, a party that provides funding, but does not control the risks or perform other functions associated with the funded activity or asset, generally does not receive anticipated returns equivalent to those received by an otherwise similarly-situated investor who also performs and controls important functions and controls important risks associated with the funded activity. […]’.
See the 1995 and 2010 OECD TP Guidelines, paragraph 6.27: ‘In assessing whether the conditions of a transaction involving intangible property reflect arm's length dealings, the amount, nature, and incidence of the costs incurred in developing or maintaining the intangible property might be examined as an aid to determining comparability or possibly relative value of the contributions of each party […]’.
See Table 9.
See Table 9.
See Table 9 and Recital 474.
In 2006, LuxSCS lent out funds to the limit of its subscribed capital, whereas the amounts lent to group companies going forward increased in proportion to the profits accumulated from the royalty payments it received from LuxOpCo.
The outstanding amount of the credit facility increased in the period 2006-2013 by EUR [1 500 – 2 000] million (see Recital 183), while the royalty payments due from LuxOpCo to LuxSCS exceeded the payments due from LuxSCS to Amazon US in the same period by EUR [1 500 – 2 000] million (EUR [3 000 – 3 500] million – EUR [1 500 – 2 000] million, see tables 2 and 10 respectively).
See footnote 176 and 178 for explanation of interdependence between the royalty and the Credit Facility.
2010 OECD TP Guidelines, paragraph 9.23 and 9.26. See also 1995 OECD TP Guidelines, paragraph 1.25-1.27 and 2017 OECD TP Guidelines, paragraph 1.61, 1.65 and 1.70.
2010 OECD TP Guidelines, paragraph 9.29. See also 1995 OECD TP Guidelines, paragraph 1.26 and 2017 OECD TP Guidelines, paragraph 1.64.
2010 OECD TP Guidelines, paragraph 9.23. See also 1995 OECD TP Guidelines, paragraph 1.25 and 2017 OECD TP Guidelines, paragraph 1.61 and 1.65.
According to paragraph 1.49 of the 2010 OECD TP Guidelines, paragraph 1.49, a ‘factor to consider in examining the economic substance of a purported risk allocation is the consequence of such an allocation in arm's length transactions. In arm's length transactions it generally makes sense for parties to be allocated a greater share of those risks over which they have relatively more control.’ The same requirement is presented in point 1.27 of the 1995 OECD TP Guidelines and illustrated in the following terms: ‘suppose that Company A contracts to produce and ship goods to Company B, and the level of production and shipment of goods are to be at the discretion of Company B. In such a case, Company A would be unlikely to agree to take on substantial inventory risk, since it exercises no control over the inventory level while Company B does. Of course, there are many risks, such as general business cycle risks, over which typically neither party has significant control and which at arm's length, could therefore be allocated to one or the other party to a transaction. Analysis is required to determine to what extent each party bears such risks’. See also 2017 OECD TP Guidelines, paragraph 1.59 -1.60.
1995 OECD TP Guidelines present this consideration in paragraph 1.26, according to which, ‘in relation to contractual terms, it may be considered whether a purported allocation of risk is consistent with the economic substance of the transaction. In this regard, the parties' conduct should generally be taken as the best evidence concerning the true allocation of risk.’ Paragraph 1.39 further provides that ‘contracts within an MNE [multinational enterprise] could be quite easily altered, suspended, extended, or terminated according to the overall strategies of the MNE [multinational enterprise] as a whole and such alterations may even be made retroactively. In such instances tax administrations would have to determine what is the underlying reality behind a contractual arrangement in applying the arm's length principle.’ See also 2010 OECD TP Guidelines, paragraph 1.67 and 9.14. 2017 OECD TP Guidelines, paragraph 1.88.
See Recital 321.
License Agreement, paragraph 1.5 (Licensed Purpose), paragraph 2.1(a) (Exclusive Intellectual Property License Grant), paragraph 2.1(b) (Derivative Works), paragraph 2.3 (Maintenance), paragraph 4.1 (Term) and paragraph 9.2 (Preventing Infringement).
See Recital 116 and Table 13 (Functions and Risks). As explained in Recital 116, LuxOpCo did, by way of its exclusive license, agree to perform all activities related to the development, enhancement, management and exploitation of the Intangibles in the European Territory, and to take over all risk associated with those activities.
See also the 2010 TP OECD Guidelines, Chapter IX, Business restructurings, Example (B): Transfer of valuable intangibles to a shell company, and in particular, the conclusion in paragraph 9.192: ‘A full consideration of all of the facts and circumstances warrants a conclusion that the economic substance of the arrangement differs from its form. In particular, the facts indicate that Company Z has no real capability to assume the risks it is allocated under the arrangement as characterised and structured by the parties. Furthermore, there is no evidence of any business reasons for the arrangement. In such a case paragraph 1.65 allows a tax administration to not recognise the structure adopted by the parties’.
An illustrative example is presented in paragraph 9.25 of the 2010 OECD TP Guidelines and 1.70 of the 2017 OECD TP Guidelines of an investor that hires a fund manager to invest funds on its account.
See Table 14.
See footnote 409, which reproduces 2010 OECD TP Guidelines, paragraph 9.24.
See Recitals 363 and following. ‘Constant development of the Intangibles is critical to Amazon European business' success (or failure). As such, by developing and controlling the Intangibles Lux SCS takes on significant business risk’, see Amazon's submission of 18 January 2016, p. 4.
License Agreement, paragraph 1.5 (Licensed Purpose).
Amazon submission of 7 June 2017, p. 2-3.
See Recital 199. As of 1 January 2014 the proportion of the Development Costs to be borne by LuxSCS was determined by the proportion of gross profit generated by the European operations to the global gross profits of Amazon (see Recital 204).
See Recital 104.
See Recital 436, which shows that it is the parties' actual conduct and not the contractual arrangements that prevail in transfer pricing.
See Recital 429.
As it is LuxOpCo, who manages and assumes the risks related to the Intangibles and to the operation of Amazon's business in Europe (see Section 9.2.1.2), LuxOpCo should keep both the upside and downside result of its activity i.e. including losses, which would potentially occur if LuxOpCo does not generate enough profit to pay an arm's length royalty for the Intangibles. The Commission presents a methodology to determine a remuneration to LuxSCS, which better reflects the economic reality of the contested transaction, in Section 9.2.1.4.
License Agreement, paragraph 4.3: ‘Termination After Failure to Cure for Failure of Performance. If either party fails to perform any of its covenants contained in this Agreement and fails to cure such default within sixty (60) days after receiving a notice from the non-defaulting party, the non-defaulting party may terminate this Agreement immediately by giving written notice to the defaulting party’.
As explained in the 2017 OECD TP Guidelines, paragraph 6.63: ‘The extent and form of the activities that will be necessary to exercise control over the financial risk attached to the provision of funding will depend on the riskiness of the investment for the funder, taking into account the amount of money at stake and the investment for which these funds are used. In accordance with the definition of control as reflected in paragraphs 1.65 and 1.66 of these Guidelines, exercising control over a specific financial risk requires the capability to make the relevant decisions related to the risk bearing opportunity, in this case the provision of the funding, together with the actual performance of these decision making functions. In addition, the party exercising control over the financial risk must perform the activities as indicated in paragraph 1.65 and 1.66 in relation to the day-to-day risk mitigation activities related to these risks when these are outsourced and related to any preparatory work necessary to facilitate its decision making, if it does not perform these activities itself’.
For instance, LuxOpCo's employees from the EU Retail Pricing Committee are responsible for setting the pricing guidelines and approving all retail pricing on the EU websites. See Amazon Internal Document: EU Policies and Procedures Manual, effective 1 May 2006, p. 5.
As explained in Recital 104, the only income of LuxSCS is the royalty and interest payments from its subsidiaries.
See Recital 183 and footnote 177.
See Table 12.
2017 ex post TP Report, p. 30.
License Agreement, paragraph 1.2: ‘“Amazon EHT [LuxSCS] Intellectual Property” means: (a) any and all intellectual property rights throughout the world, owned or otherwise held by Amazon EHT [LuxSCS] whether existing under intellectual property, unfair competition or trade secret laws, or under statute or at common law or equity, including but not limited to: (i) copyrights and author's rights (including but not limited to reviews and editorial content), trade secrets, trademarks, patents, inventions, designs, logos, and trade dress, look and feel, ‘moral rights,’ mask works, rights of personality, publicity or privacy, rights in associate or vendor information, rights in customer information (including but not limited to customer lists and customer data), and any other intellectual property and proprietary rights (including but not limited to rights in databases, marketing strategies and marketing surveys); (ii) any application or right to apply for any of the rights referred to in this clause; and (iii) any and all renewals, extensions, future equivalents and restorations thereof, now or hereafter in force and effect; (b) any and all intellectual property licensed, transferred or assigned to Amazon EHT [LuxSCS] by any third party or Affiliate; and (c) any and all Derivative Works assigned to Amazon EHT [LuxSCS] pursuant to Section 2.1(b)’.
Pursuant to the License Agreement, paragraph 2.1 (a), LuxOpCO was irrevocably granted an exclusive license ‘solely for the Licensed Purpose, to: (i) make, use, reproduce, copy, modify, translate, integrate into or extract from a database and create derivative works of Amazon EHT [LuxSCS] Intellectual Property; (ii) publicly perform or display, import, broadcast, transmit, distribute and communicate to the public by any means whatsoever, including but not limited to wire or wireless transmission process, using broadcasting, satellite, cable or network, license, offer to sell, and sell, rent, lease or lend originals and copies of, and otherwise commercially or non-commercially exploit any Amazon EHT [LuxSCS] Intellectual Property (and derivative works thereof)’. The ‘Licensed Purpose’ is set out in paragraph 1.5 as ‘(a) operating any and all World Wide Web sites accessed via the European Country code top level domains (including but not limited to.de,.uk, and.fr) for the sale of goods or services where any person or entity (including but not limited to Amazon.com, Inc. or any of its Affiliates) is the seller of record for such goods or services, (b) using Amazon EHT [LuxSCS] Intellectual Property for the purposes of providing World Wide Web services to any third party or Affiliate that contracts for such services with respect to a World Wide Web site that utilizes a European Country code top level domain, and (c) using Amazon EHT [LuxSCS] Intellectual Property within the European Country geographic territory for any other purpose.’ The Licensed purpose is identical with the Licensed Purpose for the license rights received by LuxSCS under the CSA (CSA, paragraph 1.13).
License Agreement, paragraph 2.3: ‘Maintenance. AEU shall abide by regulations and practices in force or use in any European Country in order to safeguard Amazon EHT's [LuxSCS]'s rights in the Amazon EHT [LuxSC] Intellectual Property. AEU [LuxOpCo] shall take all necessary actions to maintain such rights’.
License Agreement, paragraph 9.2: ‘Preventing Infringement. (a) AEU [LuxOpCo] shall, at its sole expense, use its best efforts to prevent, investigate, and prosecute any unauthorized use of any Amazon EHT [LuxSCS] Intellectual Property. AEU [LuxOpCo] agrees to promptly inform Amazon EHT of any such unauthorized use that comes to the AEU's [LuxOpCo's] attention. To facilitate coordination of enforcement activities, AEU [LuxOpCo] shall consult with Amazon EHT [LuxSCS] before undertaking any actions to prevent such unauthorized use of Amazon EHT [LuxSCS] Intellectual Property. (b) AEU [LuxOpCo] may, at its sole expense, institute and conduct suits to protect its rights under this Agreement against infringement and may retain all recoveries from any such suits.’. Amazon confirmed the active role of LuxOpCo in respect of the protection of the Intangibles in Europe in its letter of 7 June 2017: ‘[…] under the License Agreement, LuxOpCo had to use its best efforts to prevent, investigate, and prosecute any unauthorised use of the licensed intangibles and to undertake action in this respect, as well as to institute and to conduct suits to protect its rights under the License Agreement against infringement’.
License Agreement, paragraph 4.1: ‘Term. Subject to all necessary government approvals, this Agreement is effective as of the Effective Time and continues in effect for the life of all copyrights or author's rights and patents related to the Amazon EHT Intellectual Property licensed under Section 2.1 of this Agreement and until all proprietary and confidential information and know-how related to Amazon EHT Intellectual Property enters the public domain (“Term”).’ Paragraphs 4.2-4.3 provides that the agreement may only be terminated in the case of (i) change in control or substantial encumbrance, or (ii) after one of the parties failure to cure for its failure of performance.
License Agreement, paragraphs 2.1(a) (Exclusive Intellectual Property License Grant), 2.1(b) (Derivative Works) and 2.4 (Ownership).
License Agreement, paragraph 2.1(b) (Derivative Works).
Minutes of the managers' meeting of LuxOpCo on 21 June 2005.
Minutes of the managers' meeting of LuxOpCo on 29 January 2013, 3 June 2013 and 9 December 2014.
EU Policies and Procedures Manual, effective 1 May 2006, p. 21.
Amazon's submission of 7 June 2017. The minutes of the IP Steering Committee were provided to the Commission with the Amazon's submissions of 22 July 2016 and 11 April 2017.
Amazon Final Transcripts, [Vice President Intellectual Property, Legal, Amazon Corporate LLC, US] 20 November 2014, par. 4270: 13-25: ‘Q. […] the IP steering committee meetings. Was there a procedure for those? […] A. We would meet annually. I would come in and do a presentation of intellectual property changes, some of the disputes that were ongoing. We would do a review of the foreign filing recommendations, so that would be where we would file an application in the United States, our recommendation as far as whether we should file that outside of the United State, principally – well in Europe for each of those, and we would have a recommendation of yes or no. We would go through these with the business leaders, the technology leaders, and they would approve or reject the ideas or our recommendations.’
Deposition [Senior Vice President, Product Management-Retail, Amazon Corporate LLC, US, former Vice President/General Manager Worldwide Operations, Amazon Corporate LLC, US], 15 July 2014, p. 117, par. 8-13. See also Deposition [Senior Vice President Product Management – Retail, Amazon Corporate LLC, US], 18 September 2014, p. 29, par. 9-16: […] and Amazon Final Transcripts: [Vice President Sales International, Amazon Corporate LLC, US, former Head of European Third Party Business (such as Marketplace), LuxOpCo, Luxembourg], 4 November 2014, par. 823: 1-13 and 17-21: […].
See Amazon Post trial brief, p. 20, par. 43-46. See also Deposition [Senior Vice President Product Management – Retail, Amazon Corporate LLC, US], 18 September 2014, p. 113, par. 23-25, p. 114, par. 1-2: […].
Deposition [Senior Vice President, Product Management-Retail, Amazon Corporate LLC, US, former Vice President/General Manager Worldwide Operations, Amazon Corporate LLC, US], 15 July 2014, p. 74, par. 8-13, p. 77, par. 14-29.
Amazon Final Transcripts: [Vice President Sales International, Amazon Corporate LLC, US, former Head of European Third Party Business (such as Marketplace), LuxOpCo, Luxembourg], 4 November 2014, par. 824: 12-25, par. 825: 1-6: ‘When Amazon decides to launch a program or a product category in Europe that's already been launched in the US, isn't it true that Amazon would start with the technology framework in place in the US and then modify that for the local specifications? A. As much as possible, yes, I think it made a lot of sense and, you know, that's what we did is that if the framework had been built that was — you know, that we could leverage, it made really good economic sense to leverage that framework and evolve that framework to deal with the local nature of these markets. At the same time, right, again, it's not because you've got a framework that, you know, might work in the US It's like if we don't have the selection we can have whatever framework to do, fulfillment by Amazon or jewelry in that country without the local selection and the low prices there's not that much that will otherwise happen.’ For some products, the experiences from the US market can be useful for Europe, such as for Kindle, because US customers adapt quicker to new technology, but this cannot be generalised, as Americans prefer different brands (see Deposition [Vice President and Country Manager Germany, Amazon Deutschland Services GmbH, Munich, Germany], 13 June 2014, p. 93, par. 9-25). However, launching Kindle in Europe was a huge initiative for the local teams to ensure content rights and actually sell the Kindle in each country (see Amazon Post trial brief, p. 109, par. 345).
Deposition [Senior Vice President Product Management – Retail, Amazon Corporate LLC, US], 18 September 2014, p. 112, par. 9-20.
Deposition [Senior Vice President Product Management – Retail, Amazon Corporate LLC, US], 18 September 2014, p. 112, par. 24-25, p. 113, par. 1-7, p. 114, par. 25, p. 115, par. 1-2.
Deposition [Senior Vice President Product Management – Retail, Amazon Corporate LLC, US], 18 September 2014, p. 113, par. 13-19.
Amazon's submission of 6 March 2017, Annex 28a: list of Amazon's employees since 1997, number of jobholders employed in Luxembourg with the job code starting with T.
For localisation and translation, the team used a translation tool, developed by Amazon employees in Europe in collaboration with a team in the US. See Amazon Final Transcripts: [Vice President Sales International, Amazon Corporate LLC, US, former Head of European Third Party Business (such as Marketplace), LuxOpCo, Luxembourg], 4 November 2014, par. 830: 9-12 and 17-21, par. 831: 2-5.
Amazon submission of 22 January 2016, p. 3.
Amazon Final Transcripts [Senior Vice President Worldwide Application Software, former Vice President/General Manager North America Media and Video], 21 November 2014, par. 4633: 4-17: ‘A technical program manager typically comes from a technical background. […] They oftentimes were software development engineers and in some cases still wrote software actively. Their function as technical program manager was to translate, you know, a functional specification, a very business- and product-focused document, translate it into technical terms that a software developer could then code against.’; Deposition [Vice President and Country Manager Germany, Amazon Deutschland Services GmbH, Munich, Germany], 13 June 2014, p. 16, par. 16-19: ‘So, I tell them what to do and then somebody does it and he comes back and he shows me what he did and I tell him this is what I wanted you to do or not.’; and Amazon Final Transcripts [Senior Vice President Worldwide Application Software, former Vice President/General Manager North America Media and Video] 21 November 2014, par. 4620: 17-19: ‘Q: And a functional specification, you describe what you want consumers to experience. A: Yes’.
Deposition [Vice President and Country Manager Germany, Amazon Deutschland Services GmbH, Munich, Germany], 13 June 2014, p. 59, par. 10-25, p. 60, par. 2-5: […].
Amazon's submission of 22 July 2016, Amazon's Technology-Centric E-tailing-Business p. 12 and Recital 370.
Amazon's letter of 4 April 2017, p. 6: ‘Generally, the Vice-President for Retail business (first [Vice President International Retail, Amazon Corporate LLC, US, former Head of European Retail Business, responsible for all retail operations in Europe, LuxOpCo, Luxembourg], then [Vice President European Retail Business, responsible for all retail operations in Europe, LuxOpCo, Luxembourg, former Country Manager France, Amazon.fr SAS, Clichy, France]) was collecting and prioritizing the requests from local staff for purposes of channelling the information to the technology teams managed from the US, including in relation to the EFN-related requests. […][Vice President Sales International, Amazon Corporate LLC, US, former Head of European Third Party Business (such as Marketplace), LuxOpCo, Luxembourg], at the time he was responsible for the European marketplace business, had a similar coordination role (with a small Luxembourg team) with respect to getting US technology teams working on EFN tools for the marketplace business and then supporting local staff and third party sellers regarding the use of the newly developed technology’.
Amazon Final Transcripts [Vice President and Country Manager Germany, Amazon Deutschland Services GmbH, Munich, Germany], 4 November 2014, par. 603: 2-4: ‘It was developed in Europe with the help of central technology teams but mainly in Europe’.
Amazon Post trial brief, p. 118, par 315, 317. Deposition [Vice President and Country Manager Germany, Amazon Deutschland Services GmbH, Munich, Germany], 13 June 2014, p. 99, par. 20-22 and Deposition [Vice President International Retail, Amazon Corporate LLC, US, former Head of European Retail Business, responsible for all retail operations in Europe, LuxOpCo, Luxembourg], 7 May, 2014, p. 63, par. 16-22.
Amazon Post trial brief, p. 118-119, par. 316, 318. See also Amazon Final Transcripts [Senior Vice President Product Management – Retail, Amazon Corporate LLC, US], 4 November 2014, par. 602: 21-25, par. 603: 1-2: ‘Yes, same considerations, plus the fact that finally we — after so many years, we launched two new countries in Europe; that's Italy and Spain. And we were able to launch those countries because of the work that was done on the technology and the logistics, programs called EFN, European Fulfillment Network, which did not exist before.’
Deposition [Vice President International Retail, Amazon Corporate LLC, US, former Head of European Retail Business, responsible for all retail operations in Europe, LuxOpCo, Luxembourg], 7 May 2014, Exhibit 46, p. 4.
Amazon Post trial brief, p. 119, par. 319-321.
Annex C-2284-P to Amazon's submission of 30 September 2016.
[Description of Amazon's technology].
[Description of Amazon's technology].
[Description of Amazon's technology].
Deposition [Vice President International Retail, Amazon Corporate LLC, US, former Head of European Retail Business, responsible for all retail operations in Europe, LuxOpCo, Luxembourg], 7 May 2014, Deposition-Exhibit 46, p. 10.
Amazon internal document: EFN 2013, OP1, p. 7.
Amazon Post trial brief, p. 120-121, par. 323-330.
Amazon Final Transcripts: [Vice President International Retail, Amazon Corporate LLC, US, former Head of European Retail Business, responsible for all retail operations in Europe, LuxOpCo, Luxembourg], 3 November 2014, par. 493: 24-25, par. 494: 1-5.
Amazon post trial brief, p. 120-121, par. 323-330.
Amazon Final Transcripts: [Vice President European Retail Business, responsible for all retail operations in Europe, LuxOpCo, Luxembourg, former Country Manager France, Amazon.fr SAS, Clichy, France], 5 November 2014, par. 897: 15-25, par. 898: 1-4.
Amazon Final Transcripts: [Vice President and Country Manager Germany, Amazon Deutschland Services GmbH, Munich, Germany], 5 November 2014, par. 984: 6-15.
Packstation is a network of automated booths, run by DHL Germany, which allow for self-service collection of parcels at any time convenient to the addressee. See Deposition [Vice President and Country Manager Germany, Amazon Deutschland Services GmbH, Munich, Germany], 13 June 2014, p. 125, par. 22-25, p. 126, par. 2-25, p. 127, par. 2-6: ‘So that's why we invented with DHL, something called PAC station, which only three years ago turned into Amazon, in to Abox, Amazon Box. Which also gets implemented in New York. We have Amazon Abox in New York.’
Deposition [Vice President and Country Manager Germany, Amazon Deutschland Services GmbH, Munich, Germany], 13 June 2014, p. 57, par. 9-25, p. 58, par. 1-25, p. 59, par. 2-9: […].
Amazon Final Transcripts: [Director Finance, Amazon Instant Video Limited, London, UK, former Manager Finance and Director Finance Amazon.co.uk, London, UK], 5 November 2014, par. 1130: 10-17.
See views presented by Company X in Recitals 338 to 342.
In e-commerce, conversion rate refers to the ratio between the achieved sales and the visitors.
They refer to the direct and indirect costs related to the execution of a purchase order, for example, the research time spent by the customer.
See Recitals 337 to 342.
TP Report, page 26. According to the TP Report, before the Restructuring AIS operated the Retail Business offered through Amazon's EU Websites and AIM operated the Third-Party Seller Programs offered through the EU Web Sites.
License Agreement for Pre-existing Intellectual Property between LuxSCS and Amazon Technologies, submitted by Amazon on 12 January 2016.
License Agreement, section 1.2: ‘Amazon EHT [LuxSCS] Intellectual Property’ means: (a) any and all intellectual property rights throughout the world, owned or otherwise held by Amazon EHT [LuxSCS] […] (including but not limited to customer lists and customer data […]’; section 2.1. (a): ‘Amazon EHT [LuxSCS] irrevocably grants AEU [LuxOpCo], under all Amazon EHT [LuxSCS] intellectual property rights in or comprising the Amazon EHT [LuxSCS] Intellectual Property, whether existing now or in the future, the following sole and exclusive right and license to the Amazon EHT [LuxSCS] Intellectual Property’.
Amazon's submission of 21 August 2015, p. 2: ‘Under the License Agreement, ownership of customer data for all EU sites lies with Lux SCS. As a service to Lux SCS, these data are collected by LuxOpCo for the retail activities.’
License Agreement, paragraph 2.3 (Maintenance) and paragraph 9.5 (Compliance, Data Protection). In particular LuxOpCo is responsible for (a) limitation of access to data, (b) processing in compliance with applicable laws, (c) use of data strictly for approved purposes, (d) documentation, (e) ensuring that appropriate, operational and technological processes and procedures are in place to safeguard against any unauthorised access, loss, destruction, theft, use or disclosure of the personal data.
TP Report, pp. 6-7 and 36.
Amazon Final Transcripts [Senior Vice President Product Management – Retail, Amazon Corporate LLC, US], 4 November 2014, par. 617: 20-25, par. 618: 1-3.
Amazon Post trial brief, p. 75, par. 229-230; See also Amazon Final Transcripts: [Vice President and Country Manager Germany, Amazon Deutschland Services GmbH, Munich, Germany], 5 November 2014, par. 975: 18-25, par. 976: 1-6: ‘So brand name — I keep hearing that question from journalists. That's why I'm — I think a brand name doesn't really help you, right. A brand name is a name. I mean what really matters to customers is not the name, it's what you do, right. And you have to have the relevant selection. You have to have the relevant services, right, you have to pay attention to the customer. You have to pay attention to the product that you're selling, right, because every product comes with different characteristics and one thing might be more important here, might be more important there. The brand name itself I think has only become important because we filled it with life.’; Deposition [Vice President and Country Manager Germany, Amazon Deutschland Services GmbH, Munich, Germany], 13 June 2014, p. 146, par. 13-25: ‘Why doesn't brand help you build your business? A. Not at all. Q. Why not I said? A. What helps build your business is not a name, right? You need, you need something behind that name. I mean, Amazon is a name until you fill it with the individual product that is relevant to the customer and build to services. I've been talking about and do all that stuff. I mean, it's, it's not enough to just say we're an online store. I mean, you need to bring it alive, right? So that's what's driving it’.
Amazon Final Transcripts [Senior Vice President Product Management – Retail, Amazon Corporate LLC, US], 4 November 2014, par. 727:25, par. 728:1-8, par. 625:4-7, par. 685:5-9. Amazon Final Transcripts [Senior Vice President, Chief Financial Officer, Amazon Corporate LLC, US], 17 November 2014, par. 2848:22-25: ‘They don't really care where they get it from. They just want to get it at the right price, they want it to be convenient. They want to get it quickly. And so those are the attributes that matter to customers.’; par. 2852:11-17: ‘At the end of the day, you know, I don't think a customer really cares once they have that item that they want and in their home or wherever, where that item came from. The item is the item. What they wanted is they wanted to get it quickly, they wanted to make sure it was at the right price, it was convenient and those are the attributes.’
See Section 2.3.2.1.
Amazon Final Transcripts [Vice President and Country Manager Germany, Amazon Deutschland Services GmbH, Munich, Germany], 5 November 2014, par. 976: 5-17.
See Amazon Final Transcripts: [Vice President European Retail Business, responsible for all retail operations in Europe, LuxOpCo, Luxembourg, former Country Manager France, Amazon.fr SAS, Clichy, France], 5 November 2014, par. 905: 1-10: ‘So did the brand name help? You know, I think that it wasn't helping in the sense of building selection and trying to get vendors to come on board locally. […].’
See Amazon Final Transcripts: [Vice President Sales International, Amazon Corporate LLC, US, former Head of European Third Party Business (such as Marketplace), LuxOpCo, Luxembourg], 4 November 2014, par. 810: 6-21: ‘Similar, yeah, with the local — yeah, so what's important to me like, you know, and the reason IP exists is that what's really important for UK seller or UK customer is that Amazon.co.uk where the customer knows in the UK, the brand name, the customer knows in the UK Amazon.co.uk that's what the customer types to go and visit our site, www.Amazon — you get it — Amazon.uk, whatever it is. As it is Amazon.fr, Amazon.de, Amazon.it because they are local brands — local brand names, you know, for each of these countries. I think that's very important. Q. Okay. A. If you ask my dad, he knows Amazon.fr, you know, not Amazon.com because that's what he types, you know, to go to the France site to buy products in his local market.’ See also Amazon Final Transcripts [Vice President International Retail, Amazon Corporate LLC, US, former Head of European Retail Business, responsible for all retail operations in Europe, LuxOpCo, Luxembourg], 5 November 2014, par. 976: 5-17, which explains that, in Germany, Amazon.de wanted from the start to be perceived as a German store with German people, fulfilled out of Germany with German customer service. Therefore, Amazon.de was and is pronounced in German and not in English in Germany.
Amazon Final Transcripts: [Vice President and Country Manager Germany, Amazon Deutschland Services GmbH, Munich, Germany], 5 November 2014, par. 1001: 8-18: […].
Amazon Final Transcripts: [Vice President Sales International, Amazon Corporate LLC, US, former Head of European Third Party Business (such as Marketplace), LuxOpCo, Luxembourg], 4 November 2014, par. 772: 8-25: ‘Yeah, it did not. You know, the brand name, you know, Amazon was clearly a good name in books […].’
This was particularly the case in Europe, where it was more difficult to explain to customers that Amazon sells more than just books. See Deposition [Senior Vice President Product Management – Retail, Amazon Corporate LLC, US], 18 September 2014, p. 42: par. 8-25, p. 43 par. 1-14.
Deposition [Senior Vice President Product Management – Retail, Amazon Corporate LLC, US], 18 September 2014, p. 41: par. 14-21: […]; Deposition [Vice President and Country Manager Germany, Amazon Deutschland Services GmbH, Munich, Germany] 13 June 2014, p. 106, par. 20-25, p. 107, par. 2-9: […].
Deposition [Senior Vice President of Business Development, Amazon Corporate LLC, US], 16 July 2014, p. 117, par. 1-7.
See Recital 132.
Minutes of the managers' meeting of LuxOpCo on 9 April 2007.
Minutes of the managers' meeting of LuxOpCo on 12 April 2010 and 13 December 2010.
Minutes of the managers' meeting of LuxOpCo on 17 August 2010.
Minutes of the managers' meeting of LuxOpCo on 23 August 2010.
Minutes of the managers' meeting of LuxOpCo on 22 July 2011.
Minutes of the managers' meeting of LuxOpCo on 21 August 2007 and 12 October 2009.
Minutes of the managers' meeting of LuxOpCo on 9 January 2008.
Minutes of the managers' meeting of LuxOpCo on 29 January 2013 and 29 of January 2014.
Inter alia, Amazon internal document: minutes of the managers' meeting of LuxOpCo on 24 July 2008, 18 March 2010; 17 January 2011 and 7 April 2011.
The Parliament of the United Kingdom, House of Commons: Oral Evidence taken before the Public Accounts Committee on Monday 12 November 2012: Testimony Cecil: ‘All the strategic functions for our business in Europe are based in Luxembourg. That could be our retail business, our third-party-business, our transportation teams, our customer service, HR, finance-’: in: https://publications.parliament.uk/pa/cm201213/cmselect/cmpubacc/716/121112.htm.
The Parliament of the United Kingdom, House of Commons: Report on HMRC's 2011-2012 Accounts — Written evidence from Amazon EU Sarl [LuxOpCo] by Andrew Cecil, 13 November 2012: ‘Amazon EU Sarl [LuxOpCo] owns the inventory, earns the profits associated with the selling these products to end customers and bears the risk of any loss. From Luxembourg, Amazon EU Sarl processes and settles payments from its European customers.’ available at: https://publications.parliament.uk/pa/cm201213/cmselect/cmpubacc/writev/716/m03.htm.
See Figure 3 and Recital 180.
The Parliament of the United Kingdom, House of Commons: Report on HMRC's 2011-2012 Accounts — Written evidence from Amazon EU Sarl by Andrew Cecil, 13 November 2012: ‘Fulfilment and customer service centres located in the UK are operated by Amazon.co.uk Ltd, a UK company. Amazon.co.uk Ltd earns a margin on its operating costs for providing services performed in the UK to group companies, primarily to Amazon EU Sarl. The services provided include fulfilment and logistics services; customer support services; accountancy, tax, legal, human resources, localisation and similar back office services; merchandising and marketing support services; and purchasing assistance.’ available at: https://publications.parliament.uk/pa/cm201213/cmselect/cmpubacc/writev/716/m03.htm.
The Parliament of the United Kingdom, House of Commons: Oral Evidence taken before the Public Accounts Committee on Monday 12 November 2012: Testimony Cecil: ‘The inventory of goods that are in our fulfilment centres across Europe belongs to Amazon EU Sarl [LuxOpCo] and does not belong to the local entities that we may have across Europe.’; ‘Amazon.co.uk is a service company in the UK providing services to Amazon EU Sarl [LuxOpCo] for which it receives payment.’ available at: https://publications.parliament.uk/pa/cm201213/cmselect/cmpubacc/716/121112.htm. See also: The Parliament of the United Kingdom, House of Commons: Report on HMRC's 2011-2012 Accounts — Written evidence from Amazon EU Sarl [LuxOpCo] by Andrew Cecil, 13 November 2012‘Fulfilment and customer service centres located in the UK are operated by Amazon.co.uk Ltd, a UK company. Amazon.co.uk Ltd earns a margin on its operating costs for providing services performed in the UK to group companies, primarily to Amazon EU Sarl [LuxOpCo]. The services provided include fulfilment and logistics services; customer support services; accountancy, tax, legal, human resources, localisation and similar back office services; merchandising and marketing support services; and purchasing assistance.’ available at: https://publications.parliament.uk/pa/cm201213/cmselect/cmpubacc/writev/716/m03.htm.
See Amazon's submission of 22 July 2016‘Amazon's Technology-Centric E-tailing-Business’.
See Amazon's submission of 22 July 2016‘Amazon's Technology-Centric E-tailing-Business’.
Amazon Post trial brief, 2017 ex post TP report, p. 34, par. 91.
See Deposition [Director International Tax and Tax Policy, Amazon Corporate LLC, US], 24 April 2014, p. 129, par. 18-25, p. 130, par. 2; 6-15: […].
See Deposition [Director International Tax and Tax Policy, Amazon Corporate LLC, US], 24 April 2014, p. 126, par. 9-25, p. 127: 2-25, p. 129, par. 2-5: […].
See Email of [Senior Vice President Product Management – Retail, Amazon Corporate LLC, US], dated 16 June 2008, (in: Deposition [Vice President International Retail, Amazon Corporate LLC, US, former Head of European Retail Business, responsible for all retail operations in Europe, LuxOpCo, Luxembourg] – Deposition Exhibit 25): […].; Deposition [Vice President and Country Manager Germany, Amazon Deutschland Services GmbH, Munich, Germany], 13 June 2014, p. 61, par. 8-25, p. 62, par. 2: […]; and Deposition [Vice President and Country Manager Germany, Amazon Deutschland Services GmbH, Munich, Germany], 13 June 2014, p. 32, par. 14-25, p. 33, par. 2-25, p. 34, par. 2-12: […].
Deposition [Senior Vice President Product Management – Retail, Amazon Corporate LLC, US], 18 September 2014, p. 41 106 par. 1121-1525, p. 107, par. 1-3: […].
Deposition [Vice President International Retail, Amazon Corporate LLC, US, former Head of European Retail Business, responsible for all retail operations in Europe, LuxOpCo, Luxembourg], 7 May, 2014, p. 163, par. 25, p. 164, par. 1-8.
Amazon internal document: Amazon Who Is Our Customer DE Customers Report May 2016, p. 6.
Amazon internal document: Amazon Who Is Our Customer FR Customers Report June 2016, p. 5.
See Deposition [Vice President and Country Manager Germany, Amazon Deutschland Services GmbH, Munich, Germany], 13 June 2014, p. 227, par. 10-12: […].; Deposition [Vice President and Country Manager Germany, Amazon Deutschland Services GmbH, Munich, Germany], 13 June 2014, p. 228, par. 2-8: […].; and Deposition [Vice President and Country Manager Germany, Amazon Deutschland Services GmbH, Munich, Germany], 13 June 2014, 13 June 2014, p. 228, par. 9-21: […].
Amazon Final Transcripts: [Vice President and Country Manager Germany, Amazon Deutschland Services GmbH, Munich, Germany], 5 November 2014, par. 1002: 2-12: ‘So even within a category, there is no magic key that you can just use to turn and everything works in the category. It's calling vendors. It's sitting down with the people. The majority have local organizations. You need to convince them that this is a good thing in their local context, that you're going to drive sales and efficiencies, that you're going to not only cannibalize their business, but create incremental opportunity of growth for them. It's a very local game’.
See Email of [Vice President Finance, Amazon Corporate LLC, US] to [Senior Vice President, Chief Financial Officer, Amazon Corporate LLC, US], 2 May 2006: ‘Even though we've established Luxembourg as our European headquarters, we will continue to maintain our European country offices and operations facilities in their current locations throughout Europe. It's important that we maintain our local presence in these countries, as we want each site to reflect the tastes and preferences of our customers in these locations.’; Amazon Final Transcripts: [Vice President European Retail Business, responsible for all retail operations in Europe, LuxOpCo, Luxembourg, former Country Manager France, Amazon.fr SAS, Clichy, France], 5 November 2014, par. 909:10-17: ‘Brands are relevant on a national level. Some customers shop some brands in some countries and other brands in other countries, right, so what would be important for us to understand is not what is selling somewhere else, it's what local customer needs and wants. And we had established a list of priority brands we'd have to look to go after and start with that.’; and Amazon Final Transcripts: [Director Finance, Amazon Instant Video Limited, London, UK, former Manager Finance and Director Finance Amazon.co.uk, London, UK], 5 November 2014, par. 1100: 5-10: ‘Philips, for example, back at this period were very, very small in the UK, quite powerful in Germany. Panasonic, again, on this list, small in the UK, very strong in Germany. So different focus from customers, different focus from competition. So, yeah, they would look different.’
Amazon's observations to the Opening Decision, paragraph 101. See also TP Report, p. 13; see also, Deposition [Vice President and Country Manager Germany, Amazon Deutschland Services GmbH, Munich, Germany], 13 June 2014, p. 209, par. 20-25, p. 210, par. 2-18: ‘Germans know how to purchase food for hundreds of years, right? They're not waiting for online store to sell, you know, there's supermarket for them. They're all well fed. They all know how to feed their families. So, if you entered the segment, the selection is one of the most attractive points, because if you picture your store where you buy your noodles, for example, then this store would only have like ten, 50 different kinds of noodles, but I can tell you here in Europe we have 6 000 different kind of noodles. So, when I tasked my team to launch consumer products food, I said please, go build the biggest noodle shelf in Germany, so at least in one area customers can be sure whenever they think about noodles, I go to Amazon because they have all the noodles. They have the organic noodle, they have the Italian handmade, they have the fresh, they have the dry, they have the Japanese rice noodle. They have the import. You know, there's a thousand kinds of noodles.’; and Deposition [Vice President and Country Manager Germany, Amazon Deutschland Services GmbH, Munich, Germany], 13 June 2014, p. 227, par. 16-25: ‘People know how to buy shoes, apparel, everything, so it only makes sense to bring something where I believe I can win the customer. I can win the customer with having a larger selection or better customer service, more convenience, that's, that's my main goal, right? And that's different by country, because it's depending on size, on topics and all that stuff and that's more important than the pure when did you launch the tools category’.
Expert report of [Chairman and Founder of Interactive Media in Retail Group, the UK industry association for e-retailing and e-commerce, London, UK), 6 June 2014, (commissioned by Amazon), p. 3.
Expert Report of [Chairman and Founder of Interactive Media in Retail Group, the UK industry association for e-retailing and e-commerce, London, UK], 6 June 2014, p. 36, par. 77-78.
Deposition [Vice President and Country Manager Germany, Amazon Deutschland Services GmbH, Munich, Germany], 13 June 2014, p. 39, par. 21-25; p. 40, par. 2-3: ‘I mean it's, when a management is acquiring selection is the core task of this company here, right? I mean, you can't, operating a website, a store with nothing in it is meaningless, right, so all we do here is when the management — so at that time, it was anything between 100 and 200. Today it would be much more. Q. One hundred to 200 buyers or 100 to 200 employees? Buyers? A. No, buyers. Q. Or employees? A. Selection, people that manipulate selection’.
Expert Report of [Chairman and Founder of Interactive Media in Retail Group, the UK industry association for e-retailing and e-commerce, London, UK], 6 June 2014, p. 36, par. 77-78.
This figures include an increase from [35-40] % to [45-50] % in the number of vendor managers to support selection growth and term improvements; in: Deposition [Vice President International Retail, Amazon Corporate LLC, US, former Head of European Retail Business, responsible for all retail operations in Europe, LuxOpCo, Luxembourg], 7 May 2014, Deposition – Exhibit 23, p. 5.
In 2005, among the top 15 French e-commerce companies, 11 were French (Expert Report of [Chairman and Founder of Interactive Media in Retail Group, the UK industry association for e-retailing and e-commerce, London, UK], 6 June 2014, p. 30, par. 66).
Similarly as in Germany, French law limits Amazon in using its customary strategy of competing on price. In France, book publishers are required to set a fixed retail price and retailers cannot discount that price by more than five percent. As a consequence of that regulation, if the total price including the cost of shipping exceeds the price in a physical store, the potential customer is unlikely to buy online.
Amazon Final Transcripts: [Vice President European Retail Business, responsible for all retail operations in Europe, LuxOpCo, Luxembourg, former Country Manager France, Amazon.fr SAS, Clichy, France], 5 November 2014, par. 880: 16-18; 21-25 par. 881: 1-16.
Amazon Final Transcripts: [Vice President European Retail Business, responsible for all retail operations in Europe, LuxOpCo, Luxembourg, former Country Manager France, Amazon.fr SAS, Clichy, France], 5 November 2014, par. 879: 21-25, par. 880: 16-18. According to the social plan, ‘Amazon France [was] not generating sufficient revenue from its operations to support its cost structure and be a viable going concern.’ and Amazon internal document; ‘Collective Redundancy Program for Amazon.fr SARL’.
‘Collective Redundancy Program for Amazon.fr SARL’, p. 12.
Amazon Final Transcripts:[Vice President European Retail Business, responsible for all retail operations in Europe, LuxOpCo, Luxembourg, former Country Manager France, Amazon.fr SAS, Clichy, France], 5 November 2014, par. 881: 20-24: ‘Honestly, there was a fair chance that it wouldn't.’ Deposition [Vice President International Retail, Amazon Corporate LLC, US, former Head of European Retail Business, responsible for all retail operations in Europe, LuxOpCo, Luxembourg], 7 May, 2014, p. 160, par. 16-18: ‘[…] we are very disappointed with France, how hard [it] was to get customers to come shop at Amazon’.
An Amazon employee stated that Amazon France's business would not exist without the selection growth programme. See Amazon Final Transcripts: [Vice President European Retail Business, responsible for all retail operations in Europe, LuxOpCo, Luxembourg, former Country Manager France, Amazon.fr SAS, Clichy, France], 5 November 2014, par. 918: 19-22: ‘I think it wouldn't exist’.
Expert Report of [Chairman and Founder of Interactive Media in Retail Group, the UK industry association for e-retailing and e-commerce, London, UK], 6 June 2014, p. 40, par. 87: ‘As was the case for its earlier launches, the localized efforts of Amazon's employees were crucial in expanding into new product categories. Local employees were familiar with local tastes and had to establish and maintain relationships and work with vendors, negotiate licensing contracts with country copyright owners and organizations, determine local pricing, and more. Amazon benefited from having a local workforce who had country specific expertise’.
Expert Report of [Chairman and Founder of Interactive Media in Retail Group, the UK industry association for e-retailing and e-commerce, London, UK], 6 June 2014, p. 40, par. 87: ‘Amazon must source certain products, including media products and digital content, on a country-by country basis.’ and Deposition [Vice President International Retail, Amazon Corporate LLC, US, former Head of European Retail Business, responsible for all retail operations in Europe, LuxOpCo, Luxembourg], 7 May, 2014, p. 35, par. 22-25, ‘[…] Europe has different laws depending upon the media type and the copyright type. So digital gets way more complicated by – by country basis’.
Deposition [Baker Foundation Professor of Business Administration at Harvard Business School, US], 18 August 2014, [Baker Foundation Professor of Business Administration at Harvard Business School, US] Exhibit 7, p. 11.
Deposition [Vice President and Country Manager Germany, Amazon Deutschland Services GmbH, Munich, Germany], 13 June 2014, p. 11, par. 5-15: ‘[…] to me it's much smarter to start a German operation if you have German, knowledgeable people of the German market and not learn everything from scratch.’
http://phx.corporate-ir.net/phoenix.zhtml?c=97664&p=irol-newsArticle&ID=233853, 7.6.2017.
Amazon.com Acquires Three Leading internet Companies http://phx.corporate-ir.net/phoenix.zhtml?c=176060&p=irol-newsArticle&ID=502989.
Amazon Final Transcripts: [Vice President Sales International, Amazon Corporate LLC, US, former Head of European Third Party Business (such as Marketplace), LuxOpCo, Luxembourg], 4 November 2014, par. 802:1-6; Amazon Final Transcripts: [Vice President International Retail, Amazon Corporate LLC, US, former Head of European Retail Business, responsible for all retail operations in Europe, LuxOpCo, Luxembourg], 3 November 2014, par. 476:1-13.
Amazon Final Transcripts: [Vice President Sales International, Amazon Corporate LLC, US, former Head of European Third Party Business (such as Marketplace), LuxOpCo, Luxembourg], 4 November 2014, par. 823:1-10: ‘[…] a lot of the successes ended up being driven by what we did on a local basis’.
An Amazon employee explained that it took [0-10] years of negotiations for Amazon in Germany to establish a partnership with [a supplier] (Deposition [Vice President and Country Manager Germany, Amazon Deutschland Services GmbH, Munich, Germany], 13 June 2014, p. 26, par. 17-25, p. 27, par. 1) and several years to form a partnership with [a supplier] (Amazon Final Transcripts: [Vice President and Country Manager Germany, Amazon Deutschland Services GmbH, Munich, Germany], 5 November 2014, par. 981: 6-10). In France, Amazon found suppliers such as [a supplier] and [a supplier] quite reluctant to start selling their products with Amazon, demanding […] and it took a long time to establish a permanent partnership (Amazon Final Transcripts: [Vice President European Retail Business, responsible for all retail operations in Europe, LuxOpCo, Luxembourg, former Country Manager France, Amazon.fr SAS, Clichy, France], 5 November 2014, par. 894: 19-25; par. 895: 1-9). In the UK, an Amazon employee reported long and detailed negotiations with suppliers such as [suppliers] in order to establish agreements (Amazon Final Transcripts: [Director Finance, Amazon Instant Video Limited, London, UK, former Manager Finance and Director Finance Amazon.co.uk, London, UK], 5 November 2014, par. 1100: 16-25, par. 1101: 1-3). Moreover, many suppliers preferred a touch and feel approach for their products, which is hard to deliver for a pure player like Amazon. In view of this restriction, suppliers […] (Amazon Final Transcripts: [Director Finance, Amazon Instant Video Limited, London, UK, former Manager Finance and Director Finance Amazon.co.uk, London, UK], 5 November 2014, par. 1101: 21-25, par. 1102: 1).
Amazon Internal Document: European Fulfillment Network (EFN), p. 1: […].
Amazon Final Transcripts: [Vice President Sales International, Amazon Corporate LLC, US, former Head of European Third Party Business (such as Marketplace), LuxOpCo, Luxembourg], 4 November 2014, par. 772: 8-25: ‘Yeah, it did not. You know, the brand name, you know, Amazon was clearly a good name in books, but you know, my recruiters would call sellers I remember them telling me, look, you know, I have to tell them we're like eBay in order for the sellers to understand that actually, you know, we had an e-marketplace and, you know, pitch them and explain to them you know, which categories they might be able to list.’
Deposition [Vice President and Country Manager Germany, Amazon Deutschland Services GmbH, Munich, Germany], 13 June 2014, p. 123, par. 2-25, p. 124, par. 2-9.
Amazon Final Transcripts: [Vice President Sales International, Amazon Corporate LLC, US, former Head of European Third Party Business (such as Marketplace), LuxOpCo, Luxembourg], 4 November 2014, par. 771: 14-25, par. 776: 11-15, 24-25 par. 777: 1-25, par. 778: 4-9, par. 779: 12-21: describing the work of the recruiters with the potential sellers as critically important, because the recruiters actually did most of the work for the sellers to support the launches and to add new products to the website.
Amazon Final Transcripts: [Vice President Sales International, Amazon Corporate LLC, US, former Head of European Third Party Business (such as Marketplace), LuxOpCo, Luxembourg], 4 November 2014, par. 780: 5-25, par. 781: 1-24. See also Amazon Final Transcripts: [Vice President Sales International, Amazon Corporate LLC, US, former Head of European Third Party Business (such as Marketplace), LuxOpCo, Luxembourg], 4 November 2014, par. 827: 18-23: ‘[…] the team in Luxembourg, the onboarding team played a really big role of, like, you know, working and building. So either adding tools, as I talked about, you know, they build a lot of tools, you know, in the process or working with the technology teams that were building’.
Amazon Final Transcripts: [Vice President Sales International, Amazon Corporate LLC, US, former Head of European Third Party Business (such as Marketplace), LuxOpCo, Luxembourg], 4 November 2014, par. 829: 24-25, par. 830: 1-12.
Amazon Final Transcripts: [Vice President Sales International, Amazon Corporate LLC, US, former Head of European Third Party Business (such as Marketplace), LuxOpCo, Luxembourg], 4 November 2014, par. 782: 3-17.
Amazon internal document: 3 Year Plan: International Merchant Services, July 2009, p. 28.
Amazon Final Transcripts: [Vice President Sales International, Amazon Corporate LLC, US, former Head of European Third Party Business (such as Marketplace), LuxOpCo, Luxembourg], 4 November 2014, par. 803: 11-25: ‘[…] new countries like Spain, Italy […] We're still in this process of calling sellers and building the ecosystems’.
Amazon internal document: 3 Year Plan: International Merchant Services, July 2009, p. 29.
Amazon internal document: 3 Year Plan: International Merchant Services, July 2009, p. 2.
Amazon Final Transcripts: [Vice President Sales International, Amazon Corporate LLC, US, former Head of European Third Party Business (such as Marketplace), LuxOpCo, Luxembourg], 4 November 2014, par. 803: 24-25.
See Recital 168 and Amazon's submission of 29 May 2017, 2010 ex post TP report, p. 24-25.
Amazon Final Transcripts: [Vice President Sales International, Amazon Corporate LLC, US, former Head of European Third Party Business (such as Marketplace), LuxOpCo, Luxembourg], 4 November 2014, par. 808: 1-13: ‘So clearly we learned in the US that low prices are really important. That's very clear. At the same time, you know, how we implement low prices in the UK or low prices in Germany is very different because obviously the competitiveness of our site in the UK is defined by local retailers and local competition. So the learnings of what might happen with low prices would probably, you know, have learned from the US, maybe, maybe not. But in terms of the actual implementation and how we deal with the local nature of our retail business or third-party business, that I think has to be implemented locally’.
Deposition [Senior Vice President Product Management – Retail, Amazon Corporate LLC, US], 18 September 2014, p. 41 par. 9-10. See also Amazon Final Transcripts: [Vice President European Retail Business, responsible for all retail operations in Europe, LuxOpCo, Luxembourg, former Country Manager France, Amazon.fr SAS, Clichy, France], 5 November 2014, par. 909:22-25; par. 910: 1-2: ‘Pricing is totally local. Pricing is driven at Amazon by our willingness to be the best value for customers in the country you operate, and to be the best value for customers in the country you operate, you essentially match your competition prices and your competitors are local’.
Amazon Post trial brief, p. 31, par. 79.
Redline Minutes of the meeting between the Commission, Amazon and Luxembourg, 26 May 2016, p. 3.
Amazon Internal Document: EU Policies and Procedures Manual, effective 1 May 2006, p. 5.
Amazon Internal Document: EU Policies and Procedures Manual, effective 1 May 2006, p. 5.
Amazon submission of 14 March 2017, dated 4 April 2017.
Amazon Final Transcripts: [Vice President Sales International, Amazon Corporate LLC, US, former Head of European Third Party Business (such as Marketplace), LuxOpCo, Luxembourg], 4 November 2014, par. 831: 5-10.
Amazon Final Transcripts: [Vice President and Country Manager Germany, Amazon Deutschland Services GmbH, Munich, Germany], 5 November 2014, par. 984: 5-25.
Deposition [Vice President and Country Manager Germany, Amazon Deutschland Services GmbH, Munich, Germany], 13 June 2014, p. 50, par. 6-13.
Deposition [Vice President and Country Manager Germany, Amazon Deutschland Services GmbH, Munich, Germany], 13 June 2014, p. 52, par. 8-15.
Amazon Final Transcripts: [Vice President European Retail Business, responsible for all retail operations in Europe, LuxOpCo, Luxembourg, former Country Manager France, Amazon.fr SAS, Clichy, France], 5 November 2014, par. 939:23-25; par. 940: 1-2.
Amazon Final Transcripts: [Director Finance, Amazon Instant Video Limited, London, UK, former Manager Finance and Director Finance Amazon.co.uk, London, UK], 5 November 2014, par. 1104: 6-25 par. 1105: 1-2.
Amazon internal document: Amazon Who Is Our Customer DE Customers Report May 2016, p. 6. See also Deposition [Vice President and Country Manager Germany, Amazon Deutschland Services GmbH, Munich, Germany], 13 June 2014, p. 49, par. 18-25: For Amazon's German customers, the fact that ‘Amazon functions’, i.e. delivers, is more important to them than price, contrary to the US, where price is the most important factor: ‘If you ask a German customer today why do you love Amazon, they would say because it works, and you can find many studies showing you exactly that and price would come somewhere ranked third, a second, third at best, depending on the category. Where in the U.S., people would say Amazon has great prices, right?’; and Deposition [Vice President and Country Manager Germany, Amazon Deutschland Services GmbH, Munich, Germany], 13 June 2014, p. 151, par. 10-14: An Amazon commercial in Germany would never focus on price, because price is of lesser importance: ‘In the U.S. at that time you would show a commercial based on price, right, Amazon attractive prices. And I said that in Germany that would be meaningless, because our largest category would not have attractive prices […]’.
Amazon internal document: Amazon Who Is Our Customer FR Customers Report June 2016, p. 5-6.
Amazon Final Transcripts [Vice President and Country Manager Germany, Amazon Deutschland Services GmbH, Munich, Germany], 5 November 2014, par. 1046: 1-6: ‘So my — part of my team's job is to make sure that the customer finds the relevant content on the website. That would mean we would be adding pictures and product description. We would work on customer reviews and — that are visible changes on the website’.
Deposition [Vice President and Country Manager Germany, Amazon Deutschland Services GmbH, Munich, Germany], 13 June 2014, p. 34, par. 12-23: ‘To translate a legal text by Google, you need an individual to put it in correct wording again and that's the same thing that we do on our website, that we present to our customer, and consistency of presentation is very important in my store because, you know, the detail pages need to look the same. The language, you can't call color, color on this page and something else on the next page, so you need to have people that make sure you use consistent German terminology, otherwise the customer is completely lost’.
Amazon Final Transcripts [Vice President eCommerce platform], 24 October 2014, par. 215: 8-23: […].
Amazon Final Transcripts: [Vice President International Retail, Amazon Corporate LLC, US, former Head of European Retail Business, responsible for all retail operations in Europe, LuxOpCo, Luxembourg], 3 November 2014, par. 493: 8-25, par. 494: 1-5: […].
Amazon Final Transcripts: [Vice President International Retail, Amazon Corporate LLC, US, former Head of European Retail Business, responsible for all retail operations in Europe, LuxOpCo, Luxembourg], 3 November 2014, par. 503: 24-25, 504:1-25: […].
Deposition [Vice President and Country Manager Germany, Amazon Deutschland Services GmbH, Munich, Germany], 13 June 2014, p. 35, par. 5-18: […].
Amazon Final Transcripts: [Vice President and Country Manager Germany, Amazon Deutschland Services GmbH, Munich, Germany], 5 November 2014, par. 976: 6-17: ‘And to a certain extent, you can hear, we phonetically used the U.S. expression of the brand name so we're not saying Amazon.de but we say Amazon.de, because we didn't want customers in Germany for a minute to think about that this is a U.S. store, right. It's a German store with German people, fulfilled out of Germany, where you reach German customer service. You work with all the things that you're familiar in Germany. You find all the product that is relevant to you in Germany, and that is very, very different from France, UK, from the U.S.’.
Deposition [Vice President and Country Manager Germany, Amazon Deutschland Services GmbH, Munich, Germany], 13 June 2014, p. 49, par. 7-18.
Deposition [Vice President and Country Manager Germany, Amazon Deutschland Services GmbH, Munich, Germany], 13 June 2014, p. 148, par. 16-20.
Amazon Post trial brief, p. 31, par. 80. See also Deposition [Senior Vice President, Product Management-Retail, Amazon Corporate LLC, US, former Vice President/General Manager Worldwide Operations, Amazon Corporate LLC, US], 15 July 2014, p. 25, par. 18-23: ‘So because the networks are different, you would want to have supply chain people that understand the individual network. Supply chain people in the US for the US network; supply chain people to understand the European network; supply chain people to understand the Asian network’.
Amazon Final Transcripts [Senior Vice President Product Management – Retail, Amazon Corporate LLC, US], 4 November 2014, par. 588: 11-20: ‘Yes. There isn't and there wasn't a European transportation carrier, so we had to deal with Royal Mail in the UK, Deutsche Post in Germany, and with LaPoste in France. At that time we had to deal with Royal Mail, and Deutsche Post or LaPoste. There was not much alternative. Some small couriers were starting to grow, but we had to negotiate with the quality of service, the type of the support, and the type of delivery with the three big players in those three countries’.
Deposition [Senior Vice President, Product Management-Retail, Amazon Corporate LLC, US, former Vice President/General Manager Worldwide Operations, Amazon Corporate LLC, US], 15 July 2014, p. 37, par. 2-7, p. 55, par. 22-25, p. 126, par. 24-25, p. 127, par. 1-8: ‘The physical process in the UK and Germany had been designed by, principally by a German team. And that process just was totally different from the one that was principally Crisplant-based’.
Deposition [Senior Vice President, Product Management-Retail, Amazon Corporate LLC, US, former Vice President/General Manager Worldwide Operations, Amazon Corporate LLC, US], 15 July 2014, p. 56, par. 13-15: ‘So they were — those two were very different, even though the physical processes was the same in both plants’.
Deposition [Senior Vice President, Product Management-Retail, Amazon Corporate LLC, US, former Vice President/General Manager Worldwide Operations, Amazon Corporate LLC, US], 15 July 2014, p. 54, par. 20-23.
Deposition [Senior Vice President, Product Management-Retail, Amazon Corporate LLC, US, former Vice President/General Manager Worldwide Operations, Amazon Corporate LLC, US], 15 July 2014, p. 58, par. 9-12.
Deposition [Vice President and Country Manager Germany, Amazon Deutschland Services GmbH, Munich, Germany], 13 June 2014, p. 64, par. 25, p. 65, par. 2-10: ‘So, I did not decide the color of the walls or which equipment to put into the operations. What I delivered, the most relevant input factor, which was the expected number of articles, ASINs that we're planning to sell. That's what determines the size and the equipment, but then operations figures out the layout of the building and when and where to build it, so I do not pick the land. I do not build the building, but I tell them I'm gonna sell washing machines, which makes a huge difference in the shelving than selling books.’
Deposition [Vice President and Country Manager Germany, Amazon Deutschland Services GmbH, Munich, Germany], 13 June 2014, p. 110, par. 22-25, p. 111, par. 2-9: ‘[…] I would deliver forecasts based on what selection growth and additions I would expect and then they would determine how many square meters, […]’ p. 176 par. 19-25, p. 177 par. 2-4, p. 178, par. 2-7: ‘[…] I'm setting the biggest guidance by saying we going to sell washing machines or books and then everything follows that strain, and the cost and the margin calculation would be highly determined on that input’.
In Germany, Amazon.de asked its retail team to develop with suppliers the most efficient way to send and receive their goods. Deposition [Vice President and Country Manager Germany, Amazon Deutschland Services GmbH, Munich, Germany], 13 June 2014, p. 166, par. 2-5 and p. 137, par. 16-23: ‘So, this is the team that I, for example, sent to the inbox to make their life more efficient because I have the relation to the vendor and can change the vendor behaviour […]’ and ‘So, this would be people from, from my retail team that would be on the dock engineering the inbound, right? Like, if you sign up vendors you want to, you want to teach them how to deliver so that our fulfilment center can efficiently handle the product’.
Amazon Final Transcripts: [Director Finance, Amazon Instant Video Limited, London, UK, former Manager Finance and Director Finance Amazon.co.uk, London, UK], 5 November 2014, par. 1108: 25, par. 1109: 1-19.
Deposition [Vice President and Country Manager Germany, Amazon Deutschland Services GmbH, Munich, Germany], 13 June 2014, p. 88 par. 13-25, p. 89 par. 2-13: ‘That's just a small piece of innovation. No, innovation is not always inventing Kindle. Innovation is make a process work for specific customer behaviour that is existing’.
Amazon's submission of 8 February 2017, p. 2, concerning the LuxOpCo financing and the purposes it is used for and Recital 183.
To the extent that any of those functions were outsourced to the EU Local Affiliates, those affiliates were remunerated on a cost-plus basis, meaning that LuxOpCo has effectively absorbed the costs associated with those functions.
Up to EUR [400-500] million in 2013.
See Recital 343.
See Table 6.
See Table 5: Transportation costs recharge and Prime subscription. While Prime offers a larger spectrum of services than just the free-of-charge shipment, conservatively 100 % of proceeds from the Prime Subscription were considered to cover only transportations costs for the purpose of identifying cost categories benefitting the Intangibles.
See Recital 339.
See Recitals 205-206.
See Recital 428 and Table 3 and Table 6. The 1995 and 2010 OECD TP Guidelines, paragraphs 6.36 to 6.39, refer to situations where a company not owning trademarks or trade names undertakes marketing activities. In those circumstances, the ability of the company to share the future benefits derived from the marketing activities depends on the substance of the rights it has to the trademarks or trade names. In this sense, advertising and promotional expenditures can play an important role to maintain the value of a trademark. The following illustrative example is given in paragraph 6.36: ‘Where the distributor actually bears the cost of its marketing activities (i.e. there is no arrangement for the owner to reimburse the expenditures), the issue is the extent to which the distributor is able to share in the potential benefits from those activities. In general, in arm's length transactions the ability of a party that is not the legal owner of a marketing intangible to obtain the future benefits of marketing activities that increase the value of that intangible will depend principally on the substance of the rights of that party. For example, a distributor may have the ability to obtain benefits from its investments in developing the value of a trademark from its turnover and market share where it has a long-term contract of sole distribution rights for the trademarked product. In such cases, the distributor's share of benefits should be determined based on what a independent distributor would obtain in comparable circumstances. In some cases, a distributor may bear extraordinary marketing expenditures beyond what an independent distributor with similar rights might incur for the benefit of its own distribution activities. An independent distributor in such a case might obtain an additional return from the owner of the trademark, perhaps through a decrease in the purchase price of the product or a reduction in royalty rate.’ See also the 2017 OECD TP Guidelines, Annex to chapter VI: Examples on Intangibles, Example 10.
As explained in Recital 433, the only substantial income of LuxSCS is the royalty from LuxOpCo.
Amazon submission of 29 May 2017, 2017 ex post TP report, p. 29.
License Agreement, paragraph 7 (No Warranties).
TP Report, p. 14. As explained in the 2017 ex post TP Report, p. 23: ‘A key aspect of the European business was the effective management of the inventory which is comprised of millions of individual items purchased from third-party vendors for resale’.
As explained in the 2010 OECD TP Guidelines, paragraph 9.12: ‘[…], a tax administration is entitled to challenge the purported contractual allocation of risk between associated enterprises if it is not consistent with the economic substance of the transaction. Therefore, in examining the risk allocation between associated enterprises and its transfer pricing consequences, it is important to review not only the contractual terms but also the following additional questions:
Whether the conduct of the associated enterprises conforms to the contractual allocation of risks […],
Whether the allocation of risks in the controlled transaction is arm's length ([.,]), and
What the consequences of the risk allocation are ([…])’.
CSA as effective of 5 January 2009, paragraph 2.3 and exhibit B (Functions and Risks).
See Table 4 for a detailed overview of value adjustments and provisions built in relation with LuxOpCo's current assets.
The 2017 ex post TP Report, p. 29.
1995, 2010 and 2017 OECD TP Guidelines, paragraph 7.14.
See footnote 272.
Whether a remuneration is due for the provision of such services from one associated group company to another will depend on an analysis of the specific facts and circumstances, and, in particular, if those intra-group ‘risk management’ services in themselves represented a benefit (or an expected benefit) for LuxOpCo. See 1995, 2010 and 2017 TP OECD Guidelines, paragraph 7.29.
Amazon's submission of 27 February 2017, p. 12.
Amazon's submission of 27 February 2017, p. 13.
Amazon's submission of 27 February 2017, annex 32-9.
Amazon's submission of 27 February 2017, p. 13.
As explained in Recital 163.
Those risks were, however, not addressed by Amazon as a critical threat in the submission of 27 February 2017.
License Agreement, paragraph 9.2 (Preventing Infringement).
CSA, paragraph 9.12 (Preventing Infringement).
See paragraph 2.2 of the 2010 OECD TP Guidelines: ‘[t]he selection of a transfer pricing method always aims at finding the most appropriate method for a particular case.’ See also paragraph 1.42 of the 1995 OECD TP Guidelines.
See also Paragraphs 3.49 and 3.50 of the 1995 OECD TP Guidelines. This preference for traditional transaction methods has been maintained in paragraph 2.3 of the 2010 OECD TP Guidelines.
Amazon's submission of 4 May 2015, page 3-4, and Amazon's submission of 31 July 2015, p. 2-3.
See 1995 OECD TP Guidelines, Chapter I, section C, and 2010 OECD TP Guidelines, Chapter I, section D.1.2. Paragraph 1.17 of the 1995 OECD TP Guidelines provides the following guidance in this respect: ‘As noted above, in making these comparisons, material differences between the compared transactions or enterprises should be taken into account. In order to establish the degree of actual comparability and then to make appropriate adjustments to establish arm's length conditions (or a range thereof), it is necessary to compare attributes of the transactions or enterprises that would affect conditions in arm's length dealings. Attributes that may be important include the characteristics of the property or services transferred, the functions performed by the parties (taking into account assets used and risks assumed), the contractual terms, the economic circumstances of the parties, and the business strategies pursued by the parties. […]’. These ‘attributes’ are usually referred to as the five comparability factors. See also paragraph 1.36 of the 2010 and 2017 OECD TP Guidelines.
See Section 2.1.2.3.
1995 OECD guidelines, paragraph 1.19: ‘Characteristics that it may be important to consider include the following: […] in the case of intangible property, the form of transaction (e.g. licensing or sale), the type of property (e.g. patent, trademark, or know-how), the duration and degree of protection, and the anticipated benefits from the use of the property’.
See Recital 220, which describes Amazon's explanation why the IP licensed under the M.com Agreements is different from the Intangibles licensed under License Agreement. See also Recital 223 on the [A] Agreement. As further explained in Amazon's submission of 31 July 2015: ‘Customer data is never licensed out to third parties. Moreover, third-party use under license of the Amazon trademarks and the Amazon logo in Europe is limited to marketing and similar materials that have been approved in advance by LuxOpCo. These limited licenses are revocable, royalty-free, non-transferable and non-assignable.’
This is the same for the [G] Agreement, while other agreements are referred to as […] Agreement in the case of [H] and [B] and […] in the case of [I].
As explained in Recital 309, Luxembourg similarly concluded that those agreements, including the [A] Agreement, cannot be used for the purposes of a CUP analysis as this agreement reflects a business model that differs from the model put in place between LuxSCS and LuxOpCo.
See Recital 253.
See 1995 OECD guidelines, paragraph 1.15, 2010 and 2017 OECD TP guidelines, paragraph 1.33.
Amazon's submission of 29 May 2017, p. 5.
Amazon Final Transcripts: [Vice President Technology – Software Development, Amazon Corporate LLC, US former Vice President of Kindle, Amazon Corporate LLC, US], Trial Testimony of 18 November 2014, par. 35413540: 24-25, par. 3541: 1-25, par. 3542: 1-25: ‘Q: […] And given that these deals involved services and technology, how did Amazon price them? A: Well, the way we priced these deals was essentially looking at them as a wholistic bundle […]’.
As explained in Recital 210, this was further recognised by the US Tax Court.
See Recital 144.
Amazon Final Trial Testimony 18 November 2014, [Vice President Technology – Software Development, Amazon Corporate LLC, US former Vice President of Kindle, Amazon Corporate LLC, US], p. 3549: 9 to 3550:1, par. 3549: 10-25; par. 3550:1-10: ‘Volume impacted deal pricing pretty significantly. You can look at the — you can go through the various contracts across the M.coms and you will find that the larger ones, such as [C] and [A], they have a lower commission rate than the smaller ones such as [D] and [E] and [F], and so that was a reality of what the market forces would require, […] And so the expectation that became predominant across all of the players in this market segment was that the bigger the sales volume, the lower the commission rate would be, and that found its way into, for example, [A] Amendment 3 is where we went from a single commission structure to a tiered base structure because [A] saw that their sales were doing very well and they predicted them to do very well over the course of the remainder of the agreement and they didn't want to be spending that much because they thought it wasn't competitive with their alternatives. And you saw the same thing in the [C] deal […]’.
Amazon's submission 5 March 2015, par. 129, p. 41.
See Recital 322. As explained in the 1995 OECD TP Guidelines, paragraph 1.53: ‘The fact that there is an enterprise making losses that is doing business with profitable members of its MNE [multinational enterprise] group may suggest to the taxpayers or tax administrations that the transfer pricing should be examined. The loss [making] enterprise may not be receiving adequate compensation from the MNE [multinational enterprise] group of which it is a part in relation to the benefits derived from its activities’. See also 2010 OECD TP Guidelines, paragraph 1.71 and 2017 OECD TP Guidelines, paragraph 1.130.
See Recital 153.
Amazon's submission of 29 May 2017.
See Recital 210.
As explained in Recital 210, the US Tax Court acknowledged that under the [A] Agreement Amazon provided a variety of ancillary services to [A], which was not related to the Intangibles.
The 2017 ex post TP report is wrong to claim that ‘the license of the Intangibles from LuxSCS to LuxOpCo […] comes with a commitment by LuxSCS to maintain, update, and enhance those intangibles through ongoing investments under the CSA.’ As explained in Section 2.1.2.3, LuxOpCO takes over this ‘commitment’ as it was granted an irrevocable and exclusive license to develop, enhance and exploit the Intangibles held by LuxSCS.
See Recital 529.
See Recital 153.
See Recital 256.
TP report, p. 31.
See also the 2017 ex post TP report, p. 19: ‘For the party that does not make a unique and valuable contribution, like any other one-sided method, the TNMM tends to mathematically give the same effect as a residual profit split method as only a remuneration for the routine functions can be allocated and no residual profit can be attributed to that party. The TNMM is under the circumstances of the case, the most appropriate method for an ex-post analysis of the outcomes of the royalty transaction given that other available methods do not provide a more reliable basis for testing the transaction’.
As explained in Recital 301, Luxembourg clarified in its comments to the Opening Decision that the contested tax ruling endorses a transfer pricing arrangement based on the TNMM. According to the Luxembourg tax administration, the acceptance of the TNMM as the appropriate transfer pricing method in this case reflected the functional analysis included in the transfer pricing report.
The choice of the tested party is only necessary when using the cost plus, resale minus or TNMM, see paragraph 3.18 of the 2010 and 2017 OECD TP Guidelines. This requirement is also to be found in paragraphs 2.38, 3.26 and 3.43 of the 1995 OECD TP Guideline.
See also paragraph 2.59 and 9.79 of the 2010 OECD TP Guidelines.
2010 OECD TP Guidelines, paragraph 2.59: ‘A transactional net margin method is unlikely to be reliable if each party to a transaction makes valuable, unique contributions […] In such a case, a transactional profit split method will generally be the most appropriate method, […]. However, a one-sided method (traditional transaction method or transactional net margin method) may be applicable in cases where one of the parties makes all the unique contributions involved in the controlled transaction, while the other party does not make any unique contribution’. (emphasis added) See also 2017 OECD TP Guidelines, paragraph 2.65.
TP report, p. 30-31.
As explained in 2017 OECD TP Guidelines, paragraph 6.42: ‘[…] For example, in the case of an internally developed intangible, if the legal owner performs no relevant functions, uses no relevant assets, and assumes no relevant risks, but acts solely as a title holding entity, the legal owner will not ultimately be entitled to any portion of the return derived by the MNE [multinational enterprise] group from the exploitation of the intangible other than arm's length compensation, if any, for holding title’.
Amazon's submission of 5 March 2015, par. 91, p. 30.
As provided in 2017 OECD TP Guidelines, paragraph 6.89: ‘In transactions involving the transfer of intangibles or rights in intangibles, it is essential to identify with specificity the nature of the intangibles and rights in intangibles that are transferred between associated enterprises. Where limitations are imposed on the rights transferred, it is also essential to identify the nature of such limitations and the full extent of the rights transferred. It should be noted in this regard that the labels applied to transactions do not control the transfer pricing analysis. For example, in the case of transfer of the exclusive right to exploit a patent in Country X, the taxpayer's decision to characterise the transaction either as a sale of all of the Country X patent rights, or as a perpetual exclusive licence of a portion of the worldwide patent rights, does not affect the determination of the arm's length price if, in either case, the transaction being priced is a transfer of exclusive rights to exploit the patent in Country X over its remaining useful life. Thus, the functional analysis should identify the nature of the transferred rights in intangibles with specificity’.
As explained in Recitals 189-192, the EU Local Affiliates are providing support services etc. to LuxOpCo and are remunerated for those services on a cost plus basis.
TP Report, p. 13.
TP Report, pp. 13 and 30.
The Commission observes that these shortcomings, observed in the TP report and endorsed by the contested tax ruling, were replicated in both the 2014 Study (see Recital 324) and 2017 ex post TP report (see Recitals 386-387). In the latter, LuxOpCo's functions have been presented as of a limited value and routine nature. Second, LuxOpCo is stated to carry limited risks. In relation to the assets, it is further explicitly stated in the 2017 ex post TP report that LuxOpCo ‘does not own, manage or control any IP rights’. In this respect, the report openly ignores that LuxOpCo was granted an exclusive and irrevocable license to the Intangibles for their entire lifetime in the European market, and that LuxOpCo – in accordance with the rights granted to it under the License Agreement – in fact further develops, enhances, and manages the Intangibles on its own account and risks. As already demonstrated in the Section 9.2.1.2, this is an incorrect delineation and a manifest misrepresentation of LuxOpCo's functions, assets, and risks. See 2017 ex post TP report, p. 31-32.
See, in this context, paragraph 2.87 of the 2010 OECD TP Guidelines that state: ‘The denominator should be focussed on the relevant indicator(s) of the value of the functions performed by the tested party in the transaction under review, taking account of its assets used and risks assumed’. See also the 2017 OECD TP Guidelines, paragraph 2.93.
Paper on Transfer Pricing Methods prepared by the OECD Secretariat in July 2010, paragraph 17.
As provided in the 1995 OECD TP Guidelines, paragraph 8.8: ‘What distinguishes contributions to a CCA [CSA] from an ordinary intra-group transfer of property or services is that part or all of the compensation intended by the participants is the expected benefits to each from the pooling of resources and skills. Independent enterprises do enter into arrangements to share costs and risks when there is a common need from which the enterprises can mutually benefit. For instance, independent parties at arm's length might want to share risks (e.g. of high technology research) to minimise the loss potential from an activity, or they might engage in a sharing of costs or in joint development in order to achieve savings, perhaps from economies of scale, or to improve efficiency and productivity, perhaps from the combination of different individual strengths and spheres of expertise’. See also 2010 OECD TP Guidelines, paragraph 8.8 and 2017 OECD TP Guidelines, paragraph 8.12.
Amazon claims in its submissions of 28 October 2015, ‘Role of European Entities’, p. 2 and ‘Meeting with the Case Team’, p. 4 that LuxSCS maintains and develops the Intangibles though making ‘significant investments’. However, as explained in Section 9.2.1.1, LuxSCS does not in fact perform any value-adding functions in relation to the development of the Intangibles. By its reference to the CSA, Amazon appears to suggest that the development activities carried out in the US by A9 and ATI should be considered as functions of LuxSCS relevant for the assessment of the contested transaction. However, as explained in Recital 427, the functions carried out by A9 and ATI are carried out by these companies on their own behalf, and as evidenced by the CSA Annual Reports, LuxSCS itself does not contribute to the development under the CSA. Had it performed any of the functions assigned to it in the CSA, this would have been reflected in the cost pool. Accordingly, A9 and ATI receive remuneration for their functions in relation to the Intangibles through the Development Costs.
See Recital 206.
As explained in point 6.18 of the 1995 and 2010 OECD TP Guidelines: ‘It also is important to take into account the value of services such as technical assistance and training of employees that the developer may render in connection with the transfer. Similarly, benefits provided by the licensee to the licensor by way of improvements to products or processes may need to be taken into account.’ See also 2017 OECD TP Guidelines, paragraph 6.75: ‘The principles set out in this Section B must be applied in a variety of situations involving the development, enhancement, maintenance, protection, and exploitation of intangibles. A key consideration in each case is that associated enterprises that contribute to the development, enhancement, maintenance, protection, or exploitation of intangibles legally owned by another member of the group must receive arm's length compensation for the functions they perform, the risks they assume, and the assets they use. […]’.
As explained in Section 2.5 above, both Luxembourg tax law and the OECD framework clarify that any intra-group service carried out by LuxOpCo should not only allow LuxOpCo to recharge its costs to LuxSCS but also to receive an arm's length remuneration in addition to those costs incurred.
In the application of the TNMM with LuxSCS as the tested party guidance can be found in point 7.36 of the 1995 and 2010 OECD TP Guidelines, which specifies that ‘[W]hen an associated enterprise is acting only as an agent or intermediary in the provision of services, it is important in applying the cost-plus method that the return or mark-up is appropriate for the performance of the services themselves. In such a case, it may not be appropriate to determine arm's length pricing as a mark-up on the cost of the services but rather on the costs of the agency function itself […] For example, an associated enterprise may incur the costs of renting an advertising space on behalf of group members, costs that the group members would have incurred directly had they been independent. In such a case, it may well be appropriate to pass on these costs to the group recipients without a mark-up, and to apply a mark-up only to the costs incurred by the intermediary in performing its agency function.’ See also 2017 OECD TP Guidelines, paragraph 7.34. See also Recitals 242 and 263.
See Recital 264.
See Recital 429.
1995, 2010 and 2017 OECD TP Guidelines, Glossary.
See Recital 522 and footnote 650.
2017 OECD TP guidelines, paragraph 2.100: ‘Where treating costs as pass-through costs is found to be arm's length, a second question arises as to the consequences on comparability and on the determination of the arm's length range. Because it is necessary to compare like with like, if pass-through costs are excluded from the denominator of the taxpayer's net profit indicator, comparable costs should also be excluded from the denominator of the comparable net profit indicator. Comparability issues may arise in practice where limited information is available on the breakdown of the costs of the comparables’.
See Recital 258.
See 2010 OECD TP Guidelines, paragraph 2.1.2.1.
See Recital 148.
See Recital 353.
See Table 3: LuxOpCo's profit & loss 2006-2013, which demonstrates that COGS consistently represent around [70-75] % of LuxOpCo's total costs.
TP Report, appendix V.
Luxembourg and Amazon further argued that the introduction of the floor was meant to protect LuxOpCo, as comparable companies were loss-making in 2003 and the floor mechanism guaranteed a positive remuneration. Apart from the fact that the floor was never relevant (but only the ceiling) and the necessity of a floor has little ado with the necessity of a ceiling, the argument is in any event not very convincing. In fact, the method to establish the royalty (i.e. LuxOpCo Return) stipulates that in case LuxOpCo's Return is less than 0,45 % of EU sales, the LuxOpCo Return should be adjusted to equal the lesser of 0,45 % of Revenue or EU Operating Profit. Thus, in the event of positive turnover but where LuxOpCo incurs losses, i.e. EU Operating Profit is negative, the application of the mechanism referred to by Amazon and Luxembourg as ‘floor’ leads to the choice of the lower value, which would in this case be the negative EU Operating Profit. Therefore, LuxOpCo is not protected against losses by means of royalty pricing mechanism contained in the contested ruling. In fact, as the royalty, i.e. the remuneration for LuxSCS shall according to the method to establish the royalty never be less than zero, it would thus be zero, while potential losses would be absorbed by LuxOpCo.
See Recitals 304 and 354.
Joined Cases C-20/15 P and C-21/15 P Commission v. World Duty Free Group ECLI:EU:C:2016:981, paragraph 54 and the case-law cited.
Case C-20/15 P Commission v World Duty Free Group ECLI:EU:C:2016:981, paragraph 56 and Case C-6/12 P Oy ECLI:EU:C:2013:525, paragraph 18.
Case C-15/14 P Commission v. MOL ECLI:EU:C:2015:362, paragraph 60. See also Joined C-20/15 P and C-21/15 P Commission v. World Duty Free Group ECLI:EU:C:2016:981, paragraph 55; Case C-211/15 P Orange v. Commission ECLI:EU:C:2016:798, paragraph 53 and 54; and Case C-270/15 P Belgium v Commission ECLI:EU:C:2016:489, paragraph 49.
Joined Cases C-78/08 to C-80/08 Paint Graphos ECLI:EU:C:2009:417.
Joined C-20/15 P and C-21/15 P Commission v. World Duty Free Group ECLI:EU:C:2016:981, paragraph 57 and the case-law cited.
Joined Cases C-78/08 to C-80/08 Paint Graphos ECLI:EU:C:2009:417, paragraph 65.
Joined Cases C-106/09 P and C-107/09 P, Commission v Government of Gibraltar and United Kingdom ECLI:EU:C:2011:732, paragraph 75. See also Joined Cases C-20/15 P and C-21/15 P Commission v. World Duty Free Group ECLI:EU:C:2016:981, paragraph 54.
See Recital 240.
See Recital 240. For example, interest expenses on assets generating tax-exempt income or directors' fees, which are not for the day-to-day running of the company.
Article 164bis/LIR. See also Footnote 54. The tax consolidation of a fiscal unity assimilates the group of companies to a single (non-integrated) taxpayer.
Tax consolidation assimilates a group of companies to a single taxpayer. It is a means to eliminate the disadvantages that groups of companies experience compared to single companies with respect to income taxation. Consolidation is not an aid measure if, once consolidated, a group of companies is not treated more favourably than a single company.
C-138/09 Todaro Nunziatina & C. ECLI:EU:C:2010:291, paragraph 21.
For instance, in Commission decision of 16 October 2002 on the State aid scheme C 49/2001 (ex NN 46/2000) — Coordination Centres — implemented by Luxembourg, OJ L 170, 9.7.2003, p. 20, paragraph 53, the tax benefit could only be obtained by a ‘coordination centre that is a resident limited company which is multinational in nature and has as its sole purpose the provision of services exclusively to companies or enterprises in the same foreign international group.’ Similarly, in Commission decision of 13 May 2003 on the aid scheme implemented by France for headquarters and logistics centres, OJ L 23, 28.1.2004, p. 1, paragraph 66: ‘the benefit of the scheme is limited exclusively to headquarters and logistics centres which provide their services predominantly to associated companies situated outside France.’ Finally, in Commission decision of 24 June 2003 on the aid scheme implemented by Belgium — Tax ruling system for United States foreign sales corporations, OJ L 23, 28.1.2004, p. 14 paragraph 57: ‘the ruling system for the Belgian activities of FSCs constitutes a specific scheme applicable exclusively to FSC branches and subsidiaries’.
Amazon's submission of 5 March 2015, Annex 2.
The Commission has already found such a practice to give rise to State aid in Commission Decision (EU) 2016/1699 of 11 January 2016 on the excess profit exemption State aid scheme SA.37667 (2015/C) (ex 2015/NN) implemented by Belgium (OJ L 260, 27.9.2016, p. 61).
Joined Cases C-78/08 to C-80/08 Paint Graphos and others ECLI:EU:C:2009:417, paragraph 69.
Case C-170/83 Hydrotherm ECLI:EU:C:1984:271, paragraph 11. See also Case T-137/02 Pollmeier Malchow v Commission ECLI:EU:T:2004:304, paragraph 50.
Case C-480/09 P Acea Electrabel Produzione SpA v Commission ECLI:EU:C:2010:787 paragraphs 47 to 55; Case C-222/04 Cassa di Risparmio di Firenze SpA and Others ECLI:EU:C:2006:8, paragraph 112.
The corporate structure of the Amazon group is explained in more detail in Figure 1.
See footnote 119. Under the US tax code, domestic companies are taxable on their worldwide income, including their foreign income and – contrary to the practice of other countries – the income of subsidiaries. Generally, however, tax on the income of foreign subsidiaries is deferred until that income is distributed as a dividend or otherwise repatriated by the foreign company to its U.S. shareholders. If and when any of the profit of LuxSCS is repatriated to its US-based partners, it will be taxed under this worldwide taxation system in the same way as any other regular distribution of after-tax profits by a foreign controlled company.
See, by analogy, Case 323/82 Intermills ECLI:EU:C:1984:345, paragraph 11. See also Joined Cases C-182/03 and C-217/03 Belgium and Forum 187 v. Commission ECLI:EU:C:2005:266, paragraph 102: ‘the Commission was correct to hold that the rules governing the determination of taxable income constitute an advantage for the coordination centres and the groups to which they belong’.
The exceptions provided for in Article 107(2) of the Treaty concern aid of a social character granted to individual consumers, aid to make good the damage caused by natural disasters or exceptional occurrences and aid granted to certain areas of the Federal Republic of Germany, none of which apply in the present case.
Commission Regulation (EC) No 794/2004 of 21 April 2004 implementing Council Regulation (EU) 2015/1589 laying down detailed rules for the application of Article 108 of the Treaty on the Functioning of the European Union (OJ L 140, 30.4.2004, p. 1).
Joined Cases C-182/03 and C-217/03 Belgium and Forum 187 ASBL v Commission ECLI:EU:C:2006:416. The same reasoning was applied by the General Court in Joined Cases T-427/04 and T-17/05 France and France Telecom v Commission ECLI:EU:T:2009:474, where France Telecom benefitted from a tax exemption and the Commission concluded that the aid was granted annually, i.e. the tax differential due and exempted was calculated on an annual basis and depended, among others, on the level of tax rates voted annually by the local authorities. This conclusion was confirmed by the General Court.
See Recital 1.
Luxembourg's Observations to the Opening Decision, par. 42-43.
Luxembourg's Observations to the Opening Decision, par. 44.
Case C-74/00 Falck y A. di Bolzano v Commission ECLI:EU:C:2002:524, paragraph 140.
Case C-408/04 Commission v Salzgitter ECLI:EU:C:2008:236, paragraphs 100-107.
Id., paragraph 106.
Forum 187 (cited above), paragraph 147, Case 265/85 Van den Bergh en Jurgens and Van Dijk Food Products Lopik v Commission [1987] ECR 1155, paragraph 44.
Id.
Joined Cases C-471/09 P to C-473/09 P Territorio Histórico de Vizcaya – Diputación Foral de Vizcaya and Others v Commission ECLI:EU:C:2011:521, paragraph. 64: ‘Sur ce point, il convient de rappeler qu'un État membre, dont les autorités ont octroyé une aide en violation des règles de procédure prévues à l'article 88 CE, ne saurait, en principe, invoquer la confiance légitime des bénéficiaires pour se soustraire à l'obligation de prendre les mesures nécessaires en vue de l'exécution d'une décision de la Commission lui ordonnant de récupérer l'aide. Admettre une telle possibilité reviendrait, en effet, à priver les dispositions des articles 87 CE et 88 CE de tout effet utile, dans la mesure où les autorités nationales pourraient ainsi se fonder sur leur propre comportement illégal pour mettre en échec l'efficacité des décisions prises par la Commission en vertu de ces dispositions du traité CE’. In the same line, see also Joined Cases C-465/09 to C-470/09 Diputacion Foral de Vizcaya e.a./Commission ECLI:EU:C:2011:372, paragraph 150; and Case, C-372/97 Italy v Commission ECLI:EU:C:2003:275, paragraph 112.
Territorio Histórico de Vizcaya (cited above), paragraph 68. See also Case C-183/02 P Demesa and Territorio Histórico de Álava v Commission ECLI:EU:C:2004:701, paragraph 52.
Territorio Histórico de Vizcaya (cited above), paragraph 76.
Case 173/73 Italy v Commission ECLI:EU:C:1974:71, paragraph 13.
Commission notice on the application of the State aid rules to measures relating to direct business taxation (OJ C 384, 10.12.1998, p. 3), Recital 22: ‘If in daily practice tax rules need to be interpreted, they cannot leave room for a discretionary treatment of undertakings. Every decision of the administration that departs from the general tax rules to the benefit of individual undertakings in principle leads to a presumption of State aid and must be analysed in detail. As far as administrative rulings merely contain an interpretation of general rules, they do not give rise to a presumption of aid. However, the opacity of the decisions taken by the authorities and the room for manoeuvre which they sometimes enjoy support the presumption that such is at any rate their effect in some instances. This does not make Member States any less able to provide their taxpayers with legal certainty and predictability on the application of general tax rules’.
See, inter alia, Commission Decision 2003/81/EC of 22 August 2002 on the aid scheme implemented by Spain in favour of coordination centres in Vizcaya C 48/2001 (ex NN 43/2000) (OJ L 31, 6.2.2003, p. 26); Commission Decision 2003/512/EC of 5 September 2002 on the aid scheme implemented by Germany for control and coordination centres (OJ L 177, 16.7.2003, p. 17); Commission Decision 2003/501/EC of 16 October 2002 on the State aid scheme C49/2001 (ex NN 46/2000) — Coordination Centres —implemented by Luxembourg (OJ L 170, 9.7.2003, p. 20); Commission Decision 2003/755/EC of 17 February 2003 on the aid scheme implemented by Belgium for coordination centres established in Belgium (OJ L 282, 30.10.2003, p. 25); Commission Decision 2003/515/EC of 17 February 2003 on the State aid implemented by the Netherlands for international financing activities (OJ L 180, 18.7.2003, p. 52). Commission Decision 2004/76/EC of 13 May 2003 on the aid scheme implemented by France for headquarters and logistics centres (OJ L 23, 28.1.2004, p. 1); and Commission Decision 2004/77/EC of 24 June 2003 on the aid scheme implemented by Belgium — Tax ruling system for United States foreign sales corporations (OJ L 23, 28.1.2004, p. 14).
Joined Cases C-182/03 and C-217/03 Belgium and Forum 187 ASBL v Commission ECLI:EU:C:2006:416.
Luxembourg's observations to the Opening Decision, paragraph 43 Luxembourg quotes paragraph 19 of the report of the Code of Conduct Group (Business Taxation) to the Council (ECOFIN) which reads: ‘With respect to the Luxembourg tax measure concerning companies engaged in intra-group financing activities the Group discussed the agreed description at the meeting on 17 February 2011. Luxembourg informed the Group that Circular No 164/2 dated 28 January 2011 determines the conditions for providing advance pricing agreements confirming the remuneration of the transactions. At the meeting on 11 April 2011, Luxembourg informed that Group that Circular No 164/2 bis dated 8 April 2011 ensured that advance confirmations granted prior to the entry into force of Circular No 164/2 would cease to be valid by 31 December 2011. With the benefit of this information, the Group agreed that there was no need for this measure to be assessed against the criteria of the Code of Conduct’.
Council Conclusions of the ECOFIN Council meeting of 1 December 1997 concerning taxation policy (OJ C 2, 6.1.1998, p. 1). See also documents at the following link: http://ec.europa.eu/taxation_customs/taxation/company_tax/harmful_tax_practices/#code_conduct.
See, to that effect, Advocate General Léger's opinion in Case C-217/03, Belgium and Forum 187 ASBL v Commission ECLI:EU:C:2006:89, paragraph 376.
In the Supplementary Protocol No 1 to the Convention on the OECD of 14 December 1960, the signatories to the Convention agreed that the European Commission shall take part in the work of the OECD. European Commission representatives participate alongside Members in discussions on the OECD's work programme, and are involved in the work of the entire Organisation and its different bodies. However, while the European Commission's participation goes well beyond that of an observer, it does not have the right to vote and does not officially take part in the adoption of legal instruments submitted to the Council for adoption.
See Recital 326.
Case T-290/97 Mehibas Dordtselaan v Commission ECLI:EU:T:2000:8, paragraph 59 and Joined Cases C-182/03 and C-217/03 Belgium and Forum 187 ASBL v Commission ECLI:EU:C:2006:416, paragraph 147.
Amazon's observations to the Opening Decision, paragraph 178.
See footnote 742.
See, by way of example, Commission Decision 1999/718/EC of 24 February 1999 concerning State aid granted by Spain to Daewoo Electronics Manufacturing España SA (Demesa) (OJ L 292, 13.11.1999, p. 1); Commission Decision 2000/735/EC of 21 April 1999 on the treatment by the Netherlands tax authorities of a technolease agreement between Philips and Rabobank (OJ L 297, 24.11.2000, p. 13); Commission Decision 2000/795/EC of 22 December 1999 on the State aid implemented by Spain for Ramondín SA and Ramondín Cápsulas SA (OJ L 318, 16.12.2000, p. 36); Commission Decision 2005/709/EC of 2 August 2004 on the State aid implemented by France for France Télécom (OJ L 269, 14.10.2005, p. 30); Commission Decision 2008/551/EC of 11 December 2007 on State aid C 12/07 (ex N 799/06) planned by the Slovak Republic for Glunz&Jensen s.r.o. (OJ L 178, 5.7.2008, p. 38); Commission Decision 2008/734/EC of 4 June 2008 on State aid C 57/07 (ex N 843/06) which the Slovak Republic is planning to implement for Alas Slovakia, s.r.o. (OJ L 248, 17.9.2008, p. 19); and Decision 2011/276/EU.
See Recital 326.
Case T-214/95 Het Vlaamse Gewest (Flemish Region) v Commission ECLI:EU:T:1998:77, paragraph 54.
Albeit in the context of ‘impossibility to recover’ and not ‘difficulty to quantify the aid amount’.
See Case C-441/06 Commission v France ECLI:EU:C:2007:616, paragraph 29 and the case-law cited.
Joined Cases T-427/04 and T-17/05 France and France Telecom v Commission ECLI:EU:T:2009:474, paragraph 297.
Joined Cases T-427/04 and T-17/05 France and France Telecom v Commission ECLI:EU:T:2009:474, paragraph 299.
See Recital 549.
See Recitals 551 and 552.
See Recital 558.
2010 JTPF report, paragraph 63.
See Recital 429. As explained in the 1995 OECD TP Guidelines, paragraph 7.33: ‘[…] In an arm's length transaction, an independent enterprise normally would seek to charge for services in such a way as to generate profit, rather than providing the services merely at cost […]’. Thus LuxSCS would not only receive the mark-up on costs but also reimbursement of those costs.
As stated in Section 9.5, and Recital 607 in particular, the Luxembourg tax administration afforded favourable tax treatment to LuxOpCo. For this reason, that is the first beneficiary from which Luxembourg must recover the aid. If recovery from this beneficiary does not remove the undue advantage, recovery must be extended against the Amazon group, as the whole group forms a single economic unit benefitting from the aid. In this sense, see Joined cases T-415/05, T-416/05 and T-423/05 Greece v Commission ECLI:EU:T:2010:386, paragraph 126.
All content is available under the Open Government Licence v3.0 except where otherwise stated. This site additionally contains content derived from EUR-Lex, reused under the terms of the Commission Decision 2011/833/EU on the reuse of documents from the EU institutions. For more information see the EUR-Lex public statement on re-use.
