Out-Law News 4 min. read

EU court told to re-examine Intel appeal against fine for competition law breach

A ruling in which Intel was fined more than €1 billion for breach of EU competition rules has been set aside by the highest court in the EU after it found problems with the way Intel's appeal against the fine had been assessed.

The Court of Justice of the EU (CJEU) said the EU's General Court must re-examining the case because the General Court had erred in the way it had assessed whether Intel's rebates to computer makers were capable of restricting competition.

The CJEU's decision to ask the General Court to look again at the case is in line with the advice given to it in a non-binding opinion issued by an advocate general to the court in October last year, and is the latest stage in a long history of the case.

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) by implementing a strategy aimed at foreclosing its main competitor, Advanced Micro Devices (AMD), from the market by, for example, offering 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 AMD. Intel had also engaged in efforts to try to conceal its infringing activities, the Commission found.

The Commission therefore 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.

However, Intel appealed against the General Court's decision to the CJEU. Intel claimed that the General Court erred in law when reaching its decision to uphold the fine imposed by the Commission. It raised six grounds of appeal, three of which were considered by the CJEU in its ruling.

The CJEU concluded that the General Court had erred in law by failing to examine the rebates Intel had provided "in the light of all the relevant circumstances".

When deciding to issue its fine to Intel in 2009, the Commission determined that a competitor to Intel which was as efficient as the company "would have had to offer a price for its CPUs [central processing units] lower than its costs of producing those CPUs, even if the average price of its CPUs was lower than that of Intel".

In its statement issued at the time the Commission said that, as a result of Intel's rebates scheme, "the ability of rival manufacturers to compete and innovate was impaired" and that this "led to reduced choice for consumers".

However, Intel has challenged the way that the Commission carried out the 'as efficient competitor' test, and the conclusions it reached as a result. It said the General Court was wrong not to examine its arguments to this effect when assessing its appeal.

The CJEU has now ruled that the General Court was obliged to consider Intel's arguments on the point and to determine whether the Commission had applied the 'as efficient competitor' (AEC) test correctly. The General Court's failure to do so was an error in law, it said. 

As Intel had submitted to the Commission that its conduct was not capable of restricting competition by producing the alleged foreclosure effects, the CJEU said the Commission was required to analyse, for example, the share of the market covered by the challenged practice, the conditions for granting the rebates, their duration and their amount. 

Whilst the Commission had emphasised that the rebates at issue were by their very nature capable of restricting competition, such that an 'AEC test' was not necessary, the CJEU noted that the Commission nevertheless "carried out an in-depth examination of those circumstances", setting out "a very detailed analysis of the AEC test".  As the 'AEC test' therefore played an important role in the assessment of whether the rebates were capable of having the required foreclosure effects, the General Court should have examined all of Intel’s arguments concerning that test, the CJEU said.

The CJEU therefore set aside the General Court's 2014 ruling and referred the case back to the lower court to look again at whether Intel's rebates "are capable of restricting competition". It said this exercise will involve "the examination of factual and economic evidence".

Robert Eriksson, a competition law expert at Pinsent Masons, the law firm behind Out-Law.com, said: "It would be a significant blow for the Commission if the General Court in its re-examination of the case finds that the Commission made errors in its analysis, as it is a major precedent as regards what types of rebates are abusive."

"It was also the first major Article 102 judgment by the General Court after the Commission issued its guidance in 2009 on enforcement priorities in applying Article 102 to abusive exclusionary conduct. As the Commission stated that the Intel decision was in line with the orientations set out in that guidance, it would be damning if the General Court were to annul its decision," he said.

The CJEU also considered but dismissed claims by Intel that the Commission had acted outside of its jurisdiction when taking enforcement action in the case, and that there had been "material procedural irregularity" affecting its rights of defence. 

Eriksson said the ruling is significant in this part from a UK perspective with Brexit in mind.

"The judgment confirms it will continue to be relatively easy for the Commission to enforce EU competition law extraterritorially in the future" Eriksson said. "Post-Brexit, this could very well include cases against UK companies even when the conduct is arguably within the UK with limited effects on the EU market." 

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