On 26 January 2022, the General Court of the European Union (GC) annulled the European Commission's (EC's) €1.06 billion fine against Intel, which had been issued in May 2009 for the company's alleged abuse of its dominant position.(1) The GC called for a rigorous analysis of the impact of rebates and annuls on the EC's Intel decision. The EC must now repay the 2009 fine and the accrued interest.
In 2009, the EC charged Intel with paying rebates to certain computer manufacturers and resellers that used its semiconductors over those of rival company Advanced Micro Devices (AMD). This latest ruling shows that the GC is prepared to scrutinise evidence and economic analysis in cartel cases and to annul fine decisions if they fail to conduct an impact-based analysis or if their economic analysis is flawed.
In 2000, AMD filed a complaint with the EC on the grounds that Intel's business practices and rebate policy were driving AMD out of the x86 central processing unit (CPU) market. In May 2009, the EC fined Intel €1.06 billion (a record fine at the time) for abusing its dominant position in the x86 CPU market between 2002 and 2007.(2) Intel was found to have granted exclusivity rebates to some computer manufacturers and to retailers, in addition to have made direct payments to computer manufacturers to stop or delay the launch of certain products incorporating competitors' x86 CPUs (so-called "naked restraints").
In June 2014, the GC rejected Intel's appeal and upheld the EC's decision in its entirety.(3) At that time, the GC held that loyalty rebates can be categorised as abusive with no effects-based analysis being required. Intel appealed the judgment.
In September 2017, the Court of Justice of the European Union (CJEU) set aside the GC judgment because the GC had not examined the EC's analysis of the as-efficient-competitor (AEC) test and all of Intel's arguments concerning that test, and referred the case back to the GC for additional examination.(4)
In its January 2022 judgment,(5) the GC invalidated the finding of abuse and annulled the fine accordingly. One of the key questions was whether the conditional rebates granted by Intel to original equipment manufacturers (OEMs) could restrict competition in light of the analysis that was set out in the 2017 CJEU judgment. In order to make such a determination, the EC would have had to have considered the following factors:
- the extent of Intel's dominant position on the relevant market;
- the market share covered by the challenged practice; and
- the terms and conditions for granting the rebates at issue, as well as their duration and amount.
Furthermore, the EC would have had to have examined the possible existence of a strategy aimed at excluding from the market competitors that are at least as efficient as the dominant undertaking (ie, the AEC test).
The EC must examine at least these issues in order to assess the foreclosure ability of a rebate system. Without having conducted a more detailed analysis of their foreclosure ability, the EC erred in concluding that the rebates were abusive and violated article 102 of the Treaty on the Functioning of the European Union (TFEU).
With respect to the evidence before it, the GC found that the EC had failed to adequately determine the market share affected by the conduct, as well as the precise duration. Moreover, in this regard, the EC should also have evaluated the arguments that were put forward by Intel.
Further, the GC considered the application of the AEC test, which determines the price at which a competitor as efficient as Intel would have had to offer its x86 CPUs in order to compensate an OEM for the loss of an exclusivity payment granted by Intel. The EC also erred in this regard; for example, it calculated the contestable share of a rebate granted to an OEM and therefore erroneously relied only on an internal spreadsheet of that OEM and not on additional material illustrating a higher value – namely, statements by OEM executives in the course of private litigation between Intel and AMD in the United States and other internal emails.
The EC should also have provided evidence that covered the entire period of the alleged violations. In the case of another OEM rebate, the EC improperly attempted to claim a foreclosure effect for the entire period between November 2002 and May 2005, without providing sufficient evidence for the period between November 2002 and September 2003. The GC also found that the EC was unable to draw conclusions regarding Intel's ability to foreclose a market between the fourth quarter of 2002 and November 2005 by relying solely on data from the fourth quarter of 2002.
In addition to finding fault with the details of the EC's evidentiary analysis, the GC annulled the fine of €1.06 billion in its entirety. The GC was unable to determine the amount of the fine solely for the challenged portion of the infringement that related to the naked restraints.
The 26 January 2022 decision is a landmark judgment. It provides a welcome application of the principles established in the 2017 CJEU judgment – namely, that the EC must underpin its infringement decisions with rigorous effects-based assessment, and not rely on a formalistic approach based on presumptions of competitive harm.
Exclusivity rebates cannot be presumed to be an abuse of dominance once evidence is put to the EC of the absence of anti-competitive foreclosure. In order to bring such a case, the EC must provide rigorous and careful analysis of anti-competitive foreclosure effects; formalism is not sufficient in such scenarios. In case of rebates, an infringement under article 102 of the TFEU is not possible per se – the EC has to fulfil its obligation to examine the impact on competition in such cases, especially if the applicant presents evidence during the administrative proceedings that its conduct did not restrict competition.
However, while the EC will no doubt consider whether the GC's findings are worth appealing to the CJEU, the ruling itself is promising for past and present dominance cases that are pending before the courts and that similarly challenge the application of the AEC test. In addition to repaying the high fine from 2009, the EC must generally also repay the accrued interest, as was recently decided on 19 January 2022 in the Deutsche Telekom case.(6)
For further information on this topic please contact Sebastian Jungermann at Arnecke Sibeth Dabelstein by telephone (+49 69 979885 465) or email ([email protected]). The Arnecke Sibeth Dabelstein website can be accessed at www.asd-law.com.
(1) T-286/09 RENV.
(4) C-413/14 P
(5) T-286/09 RENV.