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From Antitrust Law Daily, September 6, 2017

Intel gets another shot at defending loyalty rebates

By Jeffrey May, J.D.

The Court of Justice of the European Union has set aside a judgment of the European Union’s General Court, upholding a €1.06 billion (approximately U.S. $1.3 billion) fine on Intel Corporation for abusing its dominant market position to foreclose competitor Advanced Micro Devices (AMD) from the market for x86 central processing units (CPUs). The Court of Justice has sent the case back to the General Court to consider whether the rebates at issue were capable of restricting competition (Intel Corp. v. European Commission, Case C-413/14 P).

Intel, a U.S.-based company that designs, develops, manufactures, and markets CPUs, chipsets, and other semiconductor components, as well as platform solutions for data processing and communications devices, was fined by the European Commission (EC) for abusing its dominant position in 2009. The action followed a complaint from AMD. The EC described two types of challenged conduct: (1) conditional loyalty rebates to four original equipment manufacturers (OEMs), namely Dell, Lenovo, HP and NEC, which required the OEMs to purchase all or almost all of their x86 CPUs from Intel, and (2) so-called "naked restrictions," which consisted of making payments to OEMs so that they would delay, cancel, or restrict the marketing of certain products equipped with AMD CPUs. In 2014, the European General Court upheld the EC's findings and fine. Intel appealed.

Jurisdiction. At the outset, the Court of Justice rejected Intel’s contention that the General Court misapplied the tests relating to the EC’s jurisdiction over the agreements concluded between Intel and Lenovo in 2006 and 2007. Intel argued that neither the test based on the place in which anticompetitive practices were implemented ("the implementation test") nor the test based on the qualified effects of those practices in the European Union ("the qualified effects test") could establish a basis for the EC’s jurisdiction. Intel’s argument that the qualified effects test, which is focused on conduct which, while not adopted within the EU, has anticompetitive effects liable to have an impact on the EU market, cannot serve as a basis for the EC’s jurisdiction was incorrect, according to the Court of Justice. In addition, the court rejected an alternative argument by Intel, that, even if the qualified effects test were applicable in this case, the General Court wrongly considered that the agreements concluded with Lenovo in 2006 and 2007 would have foreseeable, immediate, and substantial effects in Europe.

Abuse of a dominant position. After rejecting Intel’s additional contentions of procedural irregularities, the Court of Justice went on to address the finding of an abuse of a dominant position. Intel argued that, in order to find an abuse of a dominant position under EU law, an examination of all the circumstances, including the level of the rebates in question, their duration, the market shares concerned, the needs of customers and the capability of the rebates to foreclose an as efficient competitor (as efficient competitor test, "the AEC test"), was required. Before the high court, the EC suggested that the exclusivity rebates had anticompetitive features such that it was generally unnecessary to demonstrate that they are capable of restricting competition. However, the AEC test had played an important role in the EC’s assessment of whether the challenged rebate scheme was capable of having foreclosure effects on efficient competitors. Thus, the high court concluded that the General Court should have considered Intel’s contentions that the rebates at issue were not capable of restricting competition. The matter was referred back to the General Court to consider the factual and economic evidence raised by Intel.

The case is No. C-413/14 P.

Attorneys: Daniel Beard QC (Monckton Chambers) for Intel Corp. Theofanis Christoforou, Vittorio Di Bucci, and Manuel Kellerbauer for European Commission.

Companies: Intel Corp.; Advanced Micro Devices, Inc.

MainStory: TopStory Antitrust

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