• Professional News
  • 13 June 2014

Billion euro fine against Intel upheld

The General Court of the European Union has upheld the record fine of EUR 1.06bn imposed on Intel for abuse of its dominant position. The judgment sheds new light on the application of the "as-efficient-competitor test" to the rebate systems of undertakings in a dominant position.

On 13 May 2009, the European Commission imposed a fine of EUR 1.06bn on the American microchip manufacturer Intel for abuse of its dominant position in the market for x86 CPUs (processors), which are used in, for instance, Windows-based computers.

With the judgment of 12 June 2014, the General Court fully upholds the decision of the Commission as well as the fine of EUR 1.06bn imposed by the European Commission.

The fine imposed on Intel is the highest fine ever imposed on a single undertaking under the EU competition rules.

Attempt to foreclose competitor
During the period 2002-2007, Intel had attempted to foreclose its only significant competitor, AMD, from the market in various ways.

Firstly, Intel had granted rebates to four major computer manufacturers (Dell, Lenovo, HP and NEC) on the condition that they purchased exclusively or almost exclusively from Intel. This actually amounted to an exclusivity obligation.

Secondly, Intel had made direct payments to the retailer Media-Saturn-Holding, which were conditioned on the company selling only computers incorporating Intel's x86 CPUs.

Thirdly, Intel had made direct payments to the computer manufacturers HP, Acer and Lenovo with the payments being conditional upon their postponing or cancelling the launch of AMD CPU-based computers.

Through these practices Intel restricted its customers' possibilities to purchase CPUs from particularly AMD, which restricted AMD's opportunity to compete with Intel.

The judgment: Illegal exclusivity rebates
The Court found that the existence of exclusivity rebates had been proved in the Intel case. Such rebates are granted on the condition that the customer covers all or most of its requirements from the undertaking in a dominant position.

The Court particularly establishes that in connection with exclusivity rebates it is not necessary to make an assessment of the circumstances of the case to see whether the conduct actually restricts competition, in that the conduct is, by its very nature, capable of restricting competition.

The Court also emphasises that in connection with exclusivity rebates it is not necessary to examine whether a competitor as efficient as Intel would be foreclosed from the market by means of the "as-efficient-competitor test" (the "AEC test").

First judgment about the Commission's new guidelines
The judgment has been awaited with anticipation as it concerns the first fine set by the Commission on the basis of the most recent guidelines from 2009 concerning the consideration of abuse cases. The General Court's position on the Commission's application of the AEC test is of particular interest.

The judgment sheds new light on the competition law assessment of the rebate systems of undertakings in a dominant position. Notably, the General Court proposes that the abuse test is stricter when it comes to the granting of rebates than for other pricing practices, for instance selectively low prices. Thus it seems that the AEC test is mainly applicable in cases where rebates are not involved.

It has taken the court well over five years to consider the case. It is expected that Intel will lodge an appeal against the judgment to the European Court of Justice.

Read the judgement here.

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