On 26 January 2022, the General Court (“GC”) annulled the €1 billion fine imposed on Intel for alleged anticompetitive rebates. (Case T-286/09 RENV, Intel v. Commission).
A flashback: In 2009, the European Commission (the “Commission”) imposed a fine of €1 billion on Intel for the alleged abuse of its dominant position. The Commission found Intel to be dominant on the worldwide x86 CPU market and considered that Intel had abused this position through two practices:
The Commission found that these practices had the ability to foreclose competing manufacturers of x86 CPUs and to harm consumers by reducing the availability of alternatives.
In 2014, the GC upheld the Commission’s decision on appeal. The GC distinguished three categories of rebates offered by dominant companies:
The GC put the Intel rebates into the "exclusivity" category and therefore declined to examine the Commission’s effects analysis, notwithstanding Intel’s challenge of the Commission’s effects analysis in its appeal.
In 2017, the Court of Justice (the “CEJC”) overturned the GC's 2014 judgment and held that the abusive character of exclusivity rebates cannot be presumed but must be established based on all the circumstances of the case, which include the extent of Intel’s dominant position on the relevant market, the market coverage of the rebates and the conditions and arrangements for granting the rebates in question, as well as their duration and value.
The CJEU also confirmed that any category of rebates may be objectively justified by advantages and efficiencies, which benefit the consumer. Favourable and unfavourable effects must be carefully balanced to reach a conclusion on the legality of rebates. Moreover, the Commission’s assessment may include a so-called as efficient competitor (“AEC”) analysis (as it did in the case at hand).
The economic analysis carried out in the AEC test assesses to what extent equally efficient competitors can still compete despite the rebates offered by the dominant firm. In the case at hand, the AEC analysis seeks to establish at what price an AEC facing the same costs as Intel would have had to offer processors in order to compensate an OEM or retailer for the loss of the rebates offered by Intel, while still covering its costs. The Commission had carried out such an analysis, but the GC had declared it unnecessary and therefore declined to review it, erroneously as the CJEU found in 2017.
The CJEU referred the matter back to the GC, which adopted its judgment on 26 January 2022.
The GC invalidated the finding of an abuse and annulled the fine.
The initial GC judgment was affected by a single error: the failure to take into account Intel’s challenge of the Commission’s AEC analysis. Hence, when revisiting the Commission decision, the GC limited its re-assessment to this issue. Consequently, the GC did not revisit its earlier factual findings, its distinction between rebates and naked restrictions, nor the finding that the naked restrictions were abusive.
The GC set out the method defined by the CJEU for assessing whether a system of rebates has the capacity to foreclose competitors. According to the Court the Commission must:
The GC reviewed whether the Commission covered the above criteria.
In the GC’s view, the Commission had erred when concluding that the AEC test, which it had carried out sua sponte, was not necessary to conclude that the rebates had the capability to foreclose.
The GC set out the rules on the burden and required standard of proof. The presumption of innocence requires the Commission to establish the existence of an infringement.
The GC reviewed Intel’s arguments as to the errors affecting the Commission’s AEC analysis in light of the above principles.
The GC concluded that the Commission failed to establish to the requisite (but unidentified) legal standard that the rebates had the capacity to have a foreclosure effect.
In conclusion, the GC considered that the Commission’s AEC analysis was incomplete and did not meet the requisite legal standard for finding that the rebates were capable of having, or were likely to have, anticompetitive effects.
As the GC could not quantify the share of the € 1 billion fine affected by the annulment, it annulled the fine in its entirety.
A few quick comments on the 2022 Intel Judgment:
The Commission defined a broad chip market which included both home and business PCs.Because the rebates Intel’s targeted only the business PC of key customers Intel was able to argue that the rebates affected a relatively small percentage of the overall market.
The GC overturned prior judgments by holding that the Commission can rely on evidence not available to the dominant firm.
It is not entirely clear to what extent evidence of anticompetitive intent (or the existence of a plan to eliminate a competitor) may be relevant to the Commission’s assessment of the defendant’s arguments rebutting the presumption of foreclosure effects. The GC could have taken the view that the plan to eliminate AMD meant that there was no need to engage in any further analysis, a position that the ECJ had accepted in the past. However, the fact that the CJEU referred the Intel case back to the GC probably precluded that result and suggests that intent may not be decisive for ruling out economic analysis in rebate cases.
The one clear point is that the Commission has to do a good job if it relies on the AEC test to establish an infringement. If the Commission decides not to carry out an AEC test for tactical reasons, the defendant can always produce its own AEC assessment, which then places on the Commission the burden of refuting that assessment. The GC’s a serious and strict evidentiary approach to the AEC test suggests that the Commission may be very reluctant to reply on the test in future decisions.