On 13th May 2009, the Commission imposed its largest ever fine on Intel, based on Intel's anti-competitive rebates or other customer incentivisation payments in relation to its x86 CPUs, as well as payments to delay the launch of products containing competitors' chips.
The Commission's case against Intel is based on breaches of the EC rules outlawing abuses of a dominant position (set out in Article 82 of the EC Treaty). These rules are often said to impose a "special responsibility" on companies occupying a strong position in particular markets, as they prohibit some types of behaviour that might be acceptable for smaller rivals. As a rule of thumb, companies with a share of 40% or more of any market are normally said to be at risk of being considered dominant. In this case, the Commission concluded that Intel's share of the relevant market was as high as 70%, far outstripping its only meaningful competitor – Advanced Micro Devices (AMD).
Discounts and rebates can be a controversial area in competition law (indeed Intel has indicated that it may appeal this decision). The Commission acknowledges that discounts are often pro-competitive, leading to lower prices for consumers. In its recently published Guidance on Enforcement Priorities in Applying Article 82, it made clear that the key question it will ask when assessing a discount is whether the effect of the system in practice is to prevent a competitor, whose operations are as efficient as the dominant company, from expanding or entering the market.
If a company is dominant the terms of the discounts it can legally offer can be limited. In the Intel case, the Commission established that computer manufacturers always had to purchase a certain proportion of their chips from Intel. As a result, there could only ever be competition between chipmakers for a limited proportion of a manufacturer's needs at any one time (known as the "contestable portion"). The Commission found that Intel's discount schemes were structured so that any manufacturer that chose to purchase all or part of this contestable portion from a rival chip-maker would lose the considerable discount applicable to all of its purchases from Intel (including those that it would have to make in any event). In effect, therefore, the discounts were conditional on a customer purchasing all (or nearly all) of their chip requirements from Intel. The size of these discounts meant that AMD could not compete even by offering chips to manufacturers for free.
The Commission also found that Intel had made anti-competitive payments to certain of its manufacturer customers that were conditional on those manufacturers postponing the launch of products containing AMD's chips, or for restricting the availability of those products in other ways.
The Intel case, like the Commission's earlier case against Microsoft, sends a clear message that companies at risk of being found to be dominant must pay very close attention to ensuring that their behaviour conforms with competition rules to avoid the risk of serious sanction.
