General Court annuls EUR 1.6 billion fine for Intel's use of fidelity rebates

Judgment of the General Court of 26 January 2022 in case T-286/09, Intel Corporation vs the European Commission

Background

In the period 2002-2007, Intel, the world's leading manufacturer of computer chips and microprocessors, granted rebates to a number of retailers and computer manufacturers, including Acer, Dell, HP and Lenovo. The rebates were conditional on these customers using almost exclusively Intel’s components in their products. Further, Intel had in some cases paid the manufacturers for delaying or withholding computer models incorporating microchips from Intel’s competitors - so-called “naked restrictions”.

The European Commission found in 2009 that these rebates and payments were capable of foreclosing competing microchip manufacturers from the market and constituted abuse of Intel’s dominant position. The Commission therefore fined Intel a record EUR 1.06 billion.

Intel brought the Commission's decision before the General Court, but in 2014 the General Court upheld the Commission's decision in its entirety. This decision was appealed by Intel to the European Court of Justice, which in 2017 found that the Commission’s decision contained numerous errors, referring the case back to the General Court. And the Court’s renewed review has now resulted in this judgement 

The General Court’s review of the case

Initially, the General Court noted that a dominant undertaking’s use of fidelity rebates is, as a general rule, presumed to be anti-competitive. However, the General Court then referred to the observation of the Court of Justice that this presumption will not discharge the Commission from the obligation to assess if the rebate system has had specific anti-competitive effects, if the dominant undertaking argues and seeks to prove that this is not the case.

The General Court further held - in line with the findings of the Court of Justice - that such an assessment must not only take account of the dominant undertaking’s market position, the share of the market covered by the rebate system, the conditions for being awarded the rebates, and the duration and amount of the rebates. The assessment should also establish if the rebates reflect a strategy aimed at foreclosing as-efficient competitors from the market.

In the Intel case, the Commission had made an "as efficient competitor" analysis (AEC test), but had also noted that, in determining whether Intel’s rebate system was abusive, this test would not be decisive. For that reason, the Commission had not taken Intel’s counterarguments into account in its assessment. The General Court therefore had to hear Intel’s arguments as to why it had in fact not pursued a foreclosure strategy.

The General Court took the view that Intel’s evidence was capable of raising doubt as to whether the criteria for a finding of abuse were satisfied in relation to the rebates. The Court further noted that the Commission had made numerous errors in its analysis of the rebate agreements with the relevant manufacturers.

In these circumstances, the General Court concluded that the Commission’s investigation was incomplete and flawed, and that, therefore, it could not serve as a basis for a finding of abuse of dominance. Consequently, the General Court annulled the Commission’s decision and the fine of EUR 1.06 billion in its entirety.

The judgment expands the scope for use of fidelity rebate systems and increases the burden of proof to be discharged by competition authorities in order to establish that a rebate system is abusive, including by requiring proof of its anti-competitive effects. Thus, the judgment makes it less likely that such rebate systems will be deemed abusive based on a strictly formal analysis of their terms, if the dominant undertaking disputes this and produces evidence to the contrary.

The judgment does not change the finding that the “naked restrictions” were abusive. But since the General Court was unable to calculate the amount of the fine for that part of the infringement, the entire fine was annulled.

Read more here:
The General Court's judgment
The General Court’s press release in the case