Out-Law News 5 min. read

EU court advised to uphold Intel appeal against €1.06bn competition law fine

The EU's highest court has been urged to uphold an appeal brought by the computer processing giant Intel against a €1.06 billion fine it was served for breaching competition rules.

An advocate general to the Court of Justice of the EU (CJEU) outlined a number of reasons why the appeal should be reheard by the EU's General Court in a non-binding opinion published on Thursday.

Robert Erikkson, a competition law expert at Pinsent Masons, the law firm behind Out-Law.com, said that if the CJEU follows the approach recommended by the advocate general, it could become harder for the European Commission to enforce EU competition laws extraterritorially in future.

In 2009 the European Commission ruled that Intel breached rules that prohibit companies from abusing a dominant market position under Article 102 of the Treaty on the Functioning of the EU (TFEU) when it offered rebates on the sale of central processing units (CPUs) to some computer manufacturers and by paying a retailer, Media-Saturn-Holding, to sell computers with only Intel chips installed in them.

At the time the Commission also said that Intel had paid three computer manufacturers to delay, cancel or restrict the launch or distribution of computers containing CPUs made by its main rival, Advanced Micro Devices (AMD). Intel had also engaged in efforts to try to conceal its infringing activities, the regulator found.

The Commission concluded that Intel had pursued a strategy of trying to foreclose AMD from the CPUs market between October 2002 and December 2007. This conclusion was supported by the General Court in a ruling in 2014 in which it dismissed Intel's appeal against the €1.06bn fine the Commission had imposed.

Intel has appealed against the General Court's decision to the CJEU. Advocate general Nils Wahl was tasked with providing an independent and impartial opinion to the CJEU in this case before the Court reaches its decision. He has scrutinised Intel's appeal and now made recommendations on how the CJEU should rule. A CJEU judgment is typically handed down by the Court a number of months after an advocate general opinion is issued. The CJEU is not bound to follow the opinions of its advocate generals but often it does.

In its appeal, Intel has claimed that the General Court erred in law when reaching its decision to uphold the fine imposed by the Commission. It has raised six grounds of appeal.

Advocate general Wahl said it is his view that five of the six grounds of appeal should be upheld and that the judgment of the General Court should therefore be "set aside". The case should be referred back to the General Court for a rehearing of Intel's appeal, he said.

Eriksson of Pinsent Masons, the law firm behind Out-Law.com, said that it would be a major blow for the Commission if Intel’s appeal was upheld and the original decision was abolished, partly because it is "a recent key precedent as regards what types of rebates are abusive".

"Moreover, it was the first major General Court Article 102 judgment after the issuing of the Commission's 2009 guidance on enforcement priorities in applying Article 102 of the TFEU to abusive exclusionary conduct; and the Commission had stated that the Intel decision was in line with the orientations set out in that guidance," Eriksson said.

Among the faults Wahl said exist with the General Court's ruling is with the "legal characterisation" it had given to rebates Intel paid to some computer manufacturers for exclusivity in relation to use of its microchips in their machines.

Wahl said the General Court had erred in classifying the rebates in a way which meant that it did not consider whether the payment of the 'exclusivity rebates' were justified under EU competition laws in the round.

The advocate general said: "The General Court erred in law, first, in finding that ‘exclusivity rebates’ constitute a separate and unique category of rebates that require no consideration of all the circumstances in order to establish an abuse of a dominant position contrary to [EU competition laws]. Second, it erred in law in its alternative assessment of capability by failing to establish, on the basis of all the circumstances, that the rebates and payments offered by [Intel] had, in all likelihood, an anticompetitive foreclosure effect."

Another ground of Intel’s appeal is on jurisdiction where it has argued that the General Court erred in law when agreeing that the Commission had jurisdiction to enforce Article 102 of the TFEU.

Intel claimed that its conduct was neither implemented in the European Economic Area (EEA), nor had it any substantial effect in that area, and that, therefore, the Commission lacked jurisdiction to take Article 102 enforcement action. 

Eriksson said that it is recognised in case law that if EU competition law could only be applied where, for example, an agreement was formed or adopted within the EU territory, that would provide businesses with an easy way to escape EU competition law.

In its ruling the General Court had said two ways to establish a sufficient link between the conduct in question and the territory was the 'implementation' criterion or a 'qualified' effects criterion.

In Wahl’s opinion he said the implementation criterion requires that at least part of the conduct should have been implemented, executed or put into effect in the EU's internal market. The qualified effects criterion requires that the conduct had immediate, substantial and foreseeable effects in the internal market.

"From a UK perspective post-Brexit, this is an important ground of appeal where it will be very interesting to see if the CJEU takes the line of the advocate general," said Eriksson. "The easier it is for the Commission to claim jurisdiction to enforce EU competition law, the greater the likelihood that UK companies in the future will be subject to EU competition law as regards conduct within the UK, which then is outside the EU territory and, it seems, will also likely be outside the EEA."

According to Wahl, nothing in the relevant Intel conduct could be characterised as having been implemented, executed or put into effect in the internal market, as the conduct alleged as abusive arose from an agreement between Intel, a US company, and a Chinese company, concerning sales of CPUs made and sold outside the EU for incorporation into computers made in China, limiting only the possibility for another US-based company (AMD) of selling CPUs on the Chinese market.

In Wahl’s view, the General Court erred in concluding the implementation criterion was met purely on the basis of customer behaviour in the downstream notebook market, which concerned Lenovo's decision not to sell a certain computer model worldwide.

As regards the ‘qualified’ effects criterion, Wahl thought this should not be satisfied where, for example, the effect in the EU is merely hypothetical or of minor significance. The anti-competitive effect resulting from the conduct appeared to Wahl to be "rather hypothetical, speculative and unsubstantiated".

Wahl noted that the General Court itself had stated that the number of computers affected was "modest" and that it was unclear whether some of those were to be sold in the EEA. He stressed that it is incumbent upon the Commission to prove that the effects of alleged abusive conduct within the internal market may be appreciable. Wahl considered that the General Court had failed in asking the crucial question as to whether the conduct immediately or directly could have diminished competitors’ ability to compete for CPUs within the internal market. 

"It is worth noting that Wahl does not rule out that the conduct could have significantly impeded AMD’s capacity to make and market CPUs worldwide, including in the EEA, as Intel’s exclusion of the only viable competitor in the market for CPUs could be achieved regardless of whether it chose to target customers that have operations in the EEA or elsewhere," said Eriksson. "However, he found it ‘regrettable’ that no such analysis had been carried out by the General Court."

"If the CJEU agrees with Wahl, then it could be harder for the Commission to enforce EU competition law extraterritorially in the future," Eriksson said.

We are processing your request. \n Thank you for your patience. An error occurred. This could be due to inactivity on the page - please try again.