GC rejects Commission’s AEC-reasoning and annuls Intel’s fine

On 26 January 2022, the EU General Court (GC) partially annulled the European Commission’s (Commission) decision of 13 May 2009 to fine Intel for an abuse of its dominant position. The abuse concerned more specifically (i) payments to certain customers (HP, Acer and Lenovo) conditional upon the postponement of the launch of products with chips of Intel’s competitor AMD, and (ii) the loyalty rebates Intel granted to its customers (Dell, HP, Acer, NEC, Lenovo and MSH) to the detriment of its competitors and mainly AMD. The GC’s Judgment of 26 January 2022 concerned only the second element of the abuse.

The GC’s Judgment follows the EU Court of Justice’s (ECJ) Judgment of 6 September 2017 which had set aside the GC’s Judgment of 12 June 2014 (in which the GC had dismissed Intel’s appeal entirely). The ECJ had ruled in this sense on account of the fact that the GC had refused to review the Commission’s so-called as efficient competitor (AEC) test in the context of the assessment of the loyalty rebates. In this respect, the ECJ held that the GC wrongly considered the AEC-test to be irrelevant on the basis of the view that loyalty rebates are, by their very nature, capable of restricting competition and therefore constitute an abuse of a dominant position.

The AEC-test essentially consists of a comparison between (i) the cost of a product by an as-efficient competitor and (ii) the price a competitor would be required to set in order to be able to compete. If the comparison shows that such price would be below the cost of an as-efficient competitor, such competitor would not be able to compete in an economically viable way and would subsequently find itself foreclosed from the market.

In 2017, the ECJ considered that because Intel had submitted evidence during the administrative procedure in support of the claim that the loyalty rebates were not capable of restricting competition and producing the alleged foreclosure effects, the Commission was required to assess:

(i) The extent of the dominant position;

(ii) The share of the market covered by the practice - the 2022 GC’s Judgment ruled in this respect that the Commission had not properly considered this criterion as the analysis focused on only two of Intel’s customers Dell and HP, with the exclusion of others. It also found issue with the fact that only part of the infringement period was analysed for this purpose. Lastly, the GC found that the Commission could not take into account all of Dell’s and HP’s activities to analyse the coverage as the practice concerned only corporate desktops;

(iii) The conditions and arrangements for granting the rebates as well as their duration and amount – the latest GC Judgment ruled in this respect that the Commission had not carried out a thorough and exhaustive examination for all of Intel’s customers and had therefore refrained from examining the duration of the rebates as a factor intrinsically relevant for the analysis of loyalty rebates; and

(iv) The existence of a foreclosure strategy.

As a result of the GC’s criticisms with the Commission’s flawed analysis of the above elements, the GC concluded on 26 January 2022, that the Commission had not properly made the assessment as prescribed by the ECJ.

In 2017, the ECJ had also ruled that if the Commission carries out an AEC-analysis, the GC was obligated to examine all of Intel’s arguments that may call this analysis into question. In other words, the ECJ had criticized the 2014 GC’s judgment for not reviewing the AEC-test because the Commission had done such a test, even if such AEC-test may not have been necessary in the first place. In its second attempt at reviewing the Commission’s Decision, the GC clearly took this criticism into account (while confirming its earlier Judgment regarding those elements that were not put into question by the ECJ) and thoroughly reviewed the Commission’s AEC-test.

Following its unusually detailed factual review of the Commission’s Decision, the GC ruled on 26 January 2022 that the grounds of the Commission’s Decision do not support the finding of part of the infringement relating to loyalty rebates (the so-called naked restrictions were not annulled and remain therefore an infringement by Intel). As the Commission had not provided the GC with information to allow a partial adjustment of the amount of the fine – having considered the infringement as a whole – the GC annulled the fine in its entirety.

This case demonstrates that, while loyalty rebates continue to be assumed to constitute an abuse of a dominant position, the undertakings concerned can reasonably put forward arguments to rebut this presumption at which point the authorities concerned need to conduct a more thorough foreclosure analysis. This does not necessarily appear to imply the need for authorities to conduct an AEC-test but requires them to assess (i) the extent of the dominant position, (ii) the share of the market covered by the rebate practice, (iii) the conditions and arrangements of the rebates including duration and amount and (iv) the existence of a foreclosure strategy. If, however, authorities nevertheless conduct such AEC-test, they need to do so properly, subject to careful review by the courts concerned.

Should you need assistance, have any further questions regarding this client alert or competition law generally, please do not hesitate to contact any of the individuals listed or your usual contact at Simmons & Simmons.