On 6 September 2017, the European Court of Justice rendered its landmark judgment in the Intel case. The outcome of this judgment was eagerly awaited, as it had the potential to revolutionize how EU competition law assesses the business practices of undertakings with a dominant position. The Court has clearly moved away from a form-based analysis, towards a more effects-based approach.
It made clear that authorities will need to carry out a detailed economic examination of the alleged negative effects on competition and of the possible procompetitive justifications of a particular practice before an infringement of Article 102 TFEU can be established.
In 2009, the European Commission fined Intel EUR 1.06 billion because it had allegedly abused its dominant position on the market for computer processors. Central to the Commission's allegations was that Intel granted rebates to buyers if they purchased all or almost all of their demand for processors from Intel. According to the Commission and the General Court (GC), these "exclusivity rebates" could be considered abusive on account of their form, i.e. without requiring an examination of all of the circumstances of the case [see our July 2014 Newsletter]. On appeal before the Court of Justice, Intel argued that this legal test was flawed and that the Commission and the GC should have taken into account evidence submitted by Intel showing that its conduct was not capable of producing anticompetitive effects. The Court agreed with Intel. It ruled that the Commission is required to analyse, first, the extent of Intel's dominant position and, second, the share of the market covered by the challenged practices, as well as the conditions for granting the rebates in question, their duration and their amount. The Commission is also required to assess the possible existence of a strategy aimed at excluding "as efficient competitors" from the market. Last, if this analysis shows that the practices at issue are indeed capable of foreclosing as efficient competitors from the market, the Commission has to determine whether there are objective justifications for those practices. In other words, the Commission has to balance the favourable and unfavourable effects of the practice.
In the Intel case, the Court of Justice found that the GC had not (i) examined all of Intel's arguments and (ii) carried out a detailed assessment of the alleged foreclosure effects. Therefore, the Court referred the case back to the GC in order for it to examine on the basis of all available factual and economic evidence whether the rebates at issue were capable of restricting competition.
The Intel judgment makes it clear that dominant companies have slightly more leeway in adopting and implementing rebate schemes than was considered to be the case before this ruling. It also makes clear that the actual economic effects of a particular rebate scheme play a crucial role in determining whether they infringe Article 102 TFEU. However, more guidance on the nature and degree of that leeway is needed and is likely to follow from the ongoing Intel litigation.
This article was published in the Competition Law Newsletter of October 2017. Other articles in this newsletter:
- Court of Justice upholds fine imposed on Philips and LG in the cathode ray tubes cartel
- Court of Justice clarifies that a change from sole to joint control requires EU clearance only if the joint venture is "full-function"
- Court of Justice provides guidance on examining excessive prices as abuse of a dominant position
- Curaçao Competition Act entered into force on 1 September 2017
- District Court of Rotterdam dismisses Vodafone claims of abuse of dominance by KPN