News Update Competition

Our two cents on Intel: in-depth effects-based analysis likely to become the rule rather than the exception
04 二月 2022
4 February 2022

On 26 January 2022, the General Court ("GC") in its judgment in Case T-286/09 RENV, annulled in part the European Commission's ("Commission") 13 May 2009 decision imposing a EUR 1.06 billion fine on Intel for abuse of dominance in the market of microprocessors. The Court of Justice of the European Union ("CJEU"), in its 2017 judgment, had referred this back to the GC. The GC considered the Commission's analysis of the anti-competitive effects of Intel's conduct to be incomplete, thus not meeting the requisite legal standard to support such a fine.

BACKGROUND

Intel´s fine of EUR 1.06 billion for infringing Article 102 of the Treaty on the Functioning of the European Union ("TFEU") dates back to the Commission's decision of 13 May 2009 ("Decision"). In the Decision, the Commission believed that Intel had abused its dominant position on the worldwide market for x86 processors between October 2002 and December 2007 through two separate types of commercial conduct:
  • Firstly, Intel made payments to certain customers who postponed or cancelled the introduction of products based on x86 processors produced by one of its competitors, Advanced Micro Devices, the so-called "naked restrictions".
  • Secondly, Intel granted conditional rebates to European retailer Media-Saturn-Holding ("MSH") and four original equipment manufacturers ("OEM"): Dell, Lenovo, Hewlett-Packard and NEC. These rebates were granted on the basis MSH exclusively sold computers containing Intel's x86 processors and the OEMs purchased all or almost all of their x86 processors from Intel.

The Commission concluded that these practices restricted competition by their very nature, and thus, demonstrating that they had anti-competitive effects was not needed to infringe Article 102 TFEU. Additionally, the Commission conducted an as-efficient competitor ("AEC") test to examine whether Intel's rebates could have been matched by a hypothetical equally efficient competitor to substantiate its finding of abuse, even though it believed an analysis was not necessary to determine if Intel's conditional rebates were capable of having foreclosure effects on competitors. Intel appealed the Decision.

PRIOR PROCEEDINGS

The GC dismissed Intel's appeal in its entirety in its judgment of 12 June 2014, Case T-286/09. Regarding the naked restrictions, the GC concluded that the Commission had met the requisite legal standard that defines an abuse of dominance. The GC also dismissed Intel's arguments that the Commission had not shown that the rebates had a foreclosure effect. The GC held that exclusivity rebates granted by an undertaking in a dominant position were capable of restricting competition by their very nature. Although it was expected for the GC to review how the Commission applied the AEC test, it did not do so. On the contrary, the GC dismissed Intel's arguments because it did not deem an analysis was necessary for the Commission to substantiate an infringement of Article 102 TFEU.

The CJEU set aside the GC's judgment in its landmark judgment of 6 September 2017, in case C-413/14 P. The CJEU considered that, since the Commission had conducted an AEC test as part of its analysis, the GC was required to examine Intel's arguments on the application of that test. Consequently, the CJEU referred the case back to the GC to properly examine how the Commission applied the AEC test in light of the evidence Intel put forward.

GC'S CURRENT JUDGMENT

Since the CJEU referred the case back to the lower court on one point only, the GC confined the scope of its judicial review to this issue. This was namely Intel's arguments against how the Commission applied the AEC test to assess the effects of the conditional rebates on competition. The GC accepted that the naked restrictions were illegal.

Framework to assess conditional rebates
On a preliminary point, the GC recalled the CJEU's approach to determine the illegality of conditional rebates under Article 102 TFEU. In its 2017 judgment, the CJEU drew from the Hoffman-La Roche case law, according to which conditional rebates may restrict competition by their very nature and clarified its application. This does not apply when an undertaking submits supporting evidence that its conduct is incapable of producing the alleged foreclosure effects during the administrative procedure, as Intel had done in the present case. In line with the CJEU's 2017 judgment, the GC reiterated that in these situations, the Commission must, as a minimum, analyse the foreclosure capability of the conditional rebates by applying the five criteria:
  • the extent of the undertaking's dominant position on the relevant market;
  • the market share covered by the contested practice;
  • the conditions and arrangements for granting the rebates in question;
  • the duration and amount of the rebates in question; and
  • the possible existence of a strategy aiming to exclude competitors that are at least as efficient as the dominant undertaking from the market.

  • Moreover, the GC held that the Commission wrongly considered that the AEC test was not a necessary part of the evidence to demonstrate an abuse of dominance. Since the Commission had carried out an AEC test as part of its analysis, it was obliged to take this into account in determining if the rebate scheme was capable of restricting competition. As such, the GC in the current judgment, had to analyse if Intel's conditional rebate scheme was capable of restricting competition by referring to the Commission's application of the AEC test and the five criteria identified by the CJEU.

    Failure to properly apply the AEC test
    After its thorough assessment of the Commission's AEC test in the infringement decision, the GC believed that the AEC tests on MSH and the four OEMs were all vitiated by errors which raised doubts regarding the assessment's correctness. In particular, the GC found the following errors when the test was applied:
    • the foreclosure effect was extrapolated to the whole alleged infringement period based on the analysis of a narrower time period;
    • the use of exaggerated values for the conditional rebates; and
    • insufficient evidence, giving rise to doubt that the rebates were capable of having a foreclosure effect.

    Failure to properly assess criteria
    The GC found that the Commission also did not properly consider (i) the market share covered by the contested practice and (ii) the duration of the rebates, in determining the capability of Intel’s pricing practices to have a foreclosure effect. The GC added that the Commission's errors in assessing Intel's market share contravene the enforcement approach it adopted with the 2009 Guidance Paper, even though the Commission believed that the 2009 Guidance Paper did not apply to the Decision because it began to investigate Intel's conduct prior to its adoption.

    Judgment
    The GC concluded that the Commission did not establish to the requisite legal standard that the conditional rebates had a foreclosure effect on competition. The GC annulled the Decision imposing a fine on Intel for the characterisation of its conduct as abuse of dominance. Notably, the GC set aside the fine in full, even though it only set aside the finding of illegality of Intel's conditional rebates. The GC does not consider itself competent to determine which proportion of the fine relates only to the "naked restrictions". If the Commission chooses to appeal the judgment, it remains to be seen whether the CJEU will reinstate the Commission's fine or a part of it.

    TAKEAWAYS

    Key takeaways of this judgment:
    • The formalistic approach to Article 102 TFEU has shifted: abuse of dominance cases regarding pricing conduct must generally be based on an in-depth effects-based analysis because the mere notion that certain conduct is illegal is likely insufficient as the inspected companies may bring effects-based arguments forward. Even though the specific analysis can differ as abuse of dominance cases are very fact specific, the judgment leaves no doubt that the Commission must base future cases on a thorough analysis of the effects of the scrutinised conduct.
    • In this regard, the Commission is not strictly required to carry out an AEC test. In practice, however, it is clear that the Commission must engage with arguments raised to that end and may therefore have to conduct an analysis.
    • Conditional rebates must be assessed according to the five criteria identified by the CJEU, thus, making the present judgment a useful guide for applying the criteria.
Written by:
Gerrit Oosterhuis

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布鲁塞尔
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Victorine Dijkstra

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阿姆斯特丹
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