On January 26, 2022, the General Court partially annulled the Commission’s decision imposing a €1.06 billion fine on Intel for abusing its dominant position through the granting of exclusivity- conditioned rebates.[1] The General Court found that the Commission had not established to the requisite legal standard that the rebates were capable of having, or were likely to have, anticompetitive effects.[2]
Background: the Intel saga
The Commission decision. In 2009, the Commission imposed a €1.06 billion fine on Intel for having abused its dominant position in x86 central processing units (“CPUs”) through two kinds of exclusivity rebates. Specifically, Intel (i) granted rebates to four original equipment manufacturers (“OEMs”)[3] on condition that they purchased all, or almost all, of their x86 CPUs from Intel; and (ii) awarded payments to Media- Saturn, a large European retailer, on condition that it only sold computers carrying Intel’s x86 CPUs.[4] The Commission found that Intel had also abused its dominant position by making payments to three computer OEMs to postpone, cancel, or otherwise restrict the commercialization of products using Intel’s competitor’s components (the “naked restrictions”).
The Commission claimed in its decision that exclusivity rebates granted by a dominant undertaking are per se illegal. The Commission therefore considered that it was not required to show that Intel’s actions were capable of restricting competition but nonetheless carried out a 151-page long AEC test.[5] According to the Commission, this test indicated that an AEC would have had to price below average avoidable costs to compete with Intel’s discounted prices. The Commission concluded on this basis that Intel’s rebates were capable of foreclosing an AEC and were therefore abusive even if they were not per se illegal.
The initial General Court judgment. Intel appealed the decision, claiming among other things that the Commission had failed to establish that the rebates were capable of foreclosing AECs.[6] Siding with the Commission, the General Court concluded on June 12, 2014 that exclusivity rebates by dominant undertakings are per se abusive, regardless of the circ*mstances of the case.[7] The Commission therefore did not have to establish that Intel’s conduct was capable of restricting competition and there was no need for the General Court to review the Commission’s AEC test.[8]
The Court of Justice appeal. On September 6, 2017, on appeal, the Court of Justice set aside the initial General Court Judgment[9] for failure to examine Intel’s rebates in light of all relevant circ*mstances—including the AEC test which, it found, had played an important role in the Commission’s assessment.[10] The Court of Justice explained that, even though exclusivity rebates are presumptively unlawful, the presumption is rebuttable if the undertaking proves that the conduct is not capable of restricting competition and foreclosing AECs.[11]
It followed that, if a dominant undertaking submits evidence that the conduct at issue is not capable of restricting competition, the Commission must assess all relevant circ*mstances, including the following five criteria: (i) the dominant undertaking’s market position; (ii) the market share covered by the rebates; (iii) the conditions and arrangements governing the rebates; (iv) their duration and amount; and (v) the possible existence of a strategy to exclude AECs.[12]
The General Court should therefore have examined all of Intel’s arguments regarding the Commission’s application of the AEC test.[13] Since the General Court had not examined this, the Court of Justice sent the case back to the General Court to examine whether Intel’s rebates were capable of restricting competition.[14]
The General Court Renvoi Judgment: the importance of anticompetitive effects
On January 26, 2022, the General Court rendered its Renvoi Judgment annulling in part the Commission’s decision and the €1.06 billion fine in full. Applying the Court of Justice judgment, the General Court found that the Commission had erred in law by taking the view that exclusivity rebates are per se abusive, without considering the capability of those rebates to restrict competition.[15] It followed that the Commission’s second finding—namely that the rebates were capable of foreclosing an AEC—was critical to the outcome of the case. The General Court therefore examined in detail Intel’s various claims regarding the shortcomings in the Commission’s analysis.[16]
On this basis, the General Court identified numerous errors in each of the five AEC tests that the Commission carried out for Intel’s five direct and indirect customers. It concluded that the Commission had not established to the requisite legal standard the capacity of each of the rebates to have anticompetitive foreclosure effects.[17]
The General Court criticized several features in particular: the Commission’s analysis of Dell’s “contestable share;”[18] its failure to demonstrate a foreclosure effect for part of the infringement period with respect to rebates to HP; its quantification of non-cash advantages granted to Lenovo; the value of the rebates granted to NEC; and the use of data concerning a single three-month period as a proxy for the entire infringement period for both NEC and Media-Saturn.
Beyond its in-depth review of the Commission’s AEC test, the General Court found that the decision failed to properly consider two of the five criteria identified by the Court of Justice to assess the rebates’ ability to restrict competition: the share of the market covered by the rebates, and the duration thereof.[19] The Court considered that the Commission is required to consider each of the five criteria every time it needs to assess the foreclosure capability of a rebate scheme.[20] The absence of such an assessment and the errors in the AEC test vitiated the Commission’s decision.
Because it was not possible to identify the amount of the fine that related solely to the “naked restrictions,” which in the General Court’s view the Commission correctly qualified as per se illegal, the General Court annulled the entire fine.
Editors: Conor Opdebeeck-Wilson and Thorsten Schiffer
[1] Intel Corporation v. Commission (Case T-286/09 RENV) EU:T:2022:19 (“General Court Renvoi Judgment”).
[2] Ibid., para. 525.
[3] Dell, Lenovo, HP, and NEC.
[4] Intel (Case COMP/C-3/37.990), Commission decision of May 13, 2009.
[5] The AEC test is aimed to determine at what price an AEC would have to offer x86 CPUs in order to compensate an OEM for the loss of an Intel rebate, and whether at this price it could still cover its costs.
[6] Intel Corporation v. Commission (Case T-286/09) EU:T:2014:547 (“initial General Court Judgment”).
[7] Ibid., para. 87.
[8] Ibid., para. 151.
[9] Intel Corporation v. Commission (Case C-413/14 P) EU:C:2017:632. See our Alert Memorandum of October 16, 2017.
[10] Ibid., para. 143.
[11] It follows that, if only less efficient competitors are harmed, there is no harm to competition and the rebates are lawful.
[12] Ibid., paras. 137–139.
[13] Ibid., para. 144.
[14] Ibid., para. 148.
[15] General Court Renvoi Judgment, para. 145.
[16] Ibid., paras. 167–481.
[17] Ibid., para. 525.
[18] That is, the proportion of a customer’s requirements for which it is willing and able to switch to an alternative supplier. The smaller the contestable share, the greater the likelihood that the exclusivity payment will be capable of foreclosing an AEC.
[19] Ibid., paras. 499 and 520.
[20] Ibid., paras. 119 and 125.
