Insights

On the 26January 2022, the General Court of the European Union (the “GC”) delivered its judgement on the case of “Intel Corporation vs. Commission”, wherein it partially annulled a decision of the European Commission (the “Commission”) issued on the 13 of May 2009 (the “Decision”). In its decision, the Commission had imposed a fine of €1.06 billion on Intel Corporation (“Intel”) on the basis that Intel abused of its dominant position on the worldwide market for x86 processors, thereby infringing upon Art. 102 of the Treaty of the Functioning of the European Union (“TFEU”). The GC overturned this fine, finding the Commission’s analysis to be insufficient in achieving the requisite legal standard of proof confirming that Intel’s strategic conduct was capable of having, or likely to have, anti-competitive effects.

Background

In 2009, the Commission determined that the microprocessor manufacturer’s abuse was characterised by two different practices:

• The offering of rebates to four major original equipment manufacturers (OEMs) (Dell, Lenovo, Hewlett-Packard and NEC) which were conditional on them purchasing their x86 processors exclusively from Intel; and
• The awarding of payments to Media-Saturn Holding, a retailer of micro-electric devices, which were conditional on it exclusively selling computers which contained x86 processors.

Intel’s first contestation of the Decision was wholly dismissed by the GC via its judgement on the 12 June 2014.  However, on the 6 September 2017, the European Court of Justice (the “ECJ”) referred the case back to the GC, following Intel’s appeal to the GC’s judgement. The ECJ did so because it held that the GC, in its initial judgement back in 2014, failed to consider all the facts and circumstances which were relevant to the case at hand, such as, inter alia, the as-efficient competitor (AEC) test carried out by the Commission, which proved to be instrumental towards reaching its conclusion that Intel’s conduct was anti-competitive.

GC’s Findings

By means of its Decision, the GC shed light on three main focal points:

• The Onus of Proof in competition cases;
• The methodology used by the Commission when assessing Intel’s conditional rebates; and
• The errors which transpired from the Commission’s assessment of the AEC Test.

Within its review, the GC reiterated that dominant undertakings which are accused of anti-competitive conduct are entitled to the right of being presumed innocent until proven otherwise, meaning that the onus of proof ultimately rests on the Commission. Therefore, the Commission, in this case, is expected to unequivocally prove that Intel had infringed Art. 102 of the TFEU by compiling a body of clear and concise evidence. Should the Commission present evidence which, in principle, is showcasing conduct which can only be deemed as anti-competitive, the onus of proof shifts on the accused dominant undertaking to rectify their position considering the evidence presented. If the accused undertaking is able to present plausible rebuttals to the evidence put forward by the Commission, then the requisite standard of proof expected from the Commission would not have been achieved.

Whilst analysing the ECJ’s elaboration on the manner in which conditional rebates are supposed to be reviewed in order to identify whether they possess foreclosure capabilities, the GC derived three conclusions which were applicable to the case at hand. Firstly, it is permissible for the Commission to presume that conditional rebates based on loyalty are, by nature, anti-competitive. That said, should the accused undertaking provide evidence arguing that the rebates it issued do not have anti-competitive effects, the Commission cannot rely on that initial presumption to relinquish itself from having to conduct an in-depth analysis of the rebates’ ability to restrict competition. The ECJ explained that the in-depth analysis which the Commission is expected to carry out would have to, at least, consider, the following criteria: (i) the extent of the dominant undertaking’s position within the market, along with the share of the market being affected by the rebates issued; (ii) the terms and conditions of the rebates being granted such as their duration and amount; and (iii) whether the rebates are strategically designed to exclude competitors from the market. Lastly, the ECJ pointed out that the Commission was not required to carry out an AEC test as part of its analysis back in 2009. However, since the Commission did carry out an AEC test notwithstanding, the GC is obliged to consider the results of said test as to the rebates’ foreclosure capacities, especially since the AEC test proved to be pivotal for the Commission to reach its conclusion.

Finally, the GC conducted its own thorough analysis of the AEC test carried out by the Commission, and considered the evidence presented by Intel in its appeal. In this regard, Intel identified several inaccuracies and miscalculations, primarily in throwing light on the contestable share of the market, which is the percentage of the customer demand that may be taken from the dominant undertaking by an as-efficient competitor, as well as the conditional rebates’ value, both of which ultimately affected the outcome and validity of the test. In fact, the GC concluded that the AEC test conducted by the Commission could not be deemed to be conclusive given that, in this regard, it failed to carefully consider two of the above-mentioned criteria.  Firstly, through its analysis, the Commission erroneously considered the duration of the conditional rebates to bear no relevance to determining their capacity to be anti-competitive. Secondly, the Commission only considered the market shares of two of the involved OEMs.  In addition, it analysed these market shares for only a part of the time period in which the conditional rebates were being carried out.

In the light of the AEC Test’s inconclusiveness, the Decision was annulled by the GC in so far as it relates to the conditional rebates issued by Intel. As a result, the fine was totally annulled due to the GC’s inability to quantify the amount of such fine, otherwise issued in relation to the naked restrictions carried out by Intel, this being the other alleged infringement in this case.

So long as an as an appeal is solely based on points of law, the Commission has until the 5 April 2022 to appeal the Decision.

This article was first published in the Malta Independent.