Intel's fine of EUR 1.06 billion overturned
By rejecting the presumption that exclusivity rebates inherently constitute an abuse of dominance "by object", the ECJ has set a new precedent, raising the threshold for establishing anti-competitive practices under Article 102 TFEU. The ruling reinforces the importance of the as-efficient competitor test ("AEC-test") in determining whether a rebate scheme excludes equally efficient competitors and thereby constitutes an abuse of dominance under Article 102 TEUF.
The ruling redefines the framework within which dominant firms operate, clarifying the legal criteria for assessing rebate. The ruling not only brings the Intel case to a close, at least for now, but also marks a new chapter in the EU's approach to competition enforcement. This development may compel the Commission to re-evaluate its new draft Guidelines on Article 102 TFEU to ensure alignment with the judgement.
Background
In 2009, the Commission imposed a fine of EUR 1.06 billion on Intel for allegedly abusing its dominant position on the x86 CPU market by (i) granting rebates to computer manufactures on the condition that they purchased all or nearly all of their x86 CPUs from Intel and (ii) implementing so-called "naked restrictions" by making direct payments to manufacturers to delay or cancel the launch of products using x86 CPUs from Intel's competitors.
The GC initially upheld the Commission's decision, concluding that Intel's practice constituted an abuse of dominance by its very nature ("by object") and dismissed Intel's argument that such rebates should only be categorised as abusive following an AEC-test to assess their actual impact on competition. Upon appeal, the ECJ referred the case back to the GC, primarily on the grounds that the AEC test had not been sufficiently reviewed. Following reconsideration, the GC ruled that, although exclusivity rebates generally give rise to competition concerns, this presumption is rebuttable. The GC held that the AEC test was necessary to determine whether Intel's practices effectively foreclosed equally efficient competitors. The ECJ has now confirmed this approach, emphasising the critical role of the AEC-test in assessing the competitive impact of rebates under Article 102 TFEU.
The ruling
The ECJ first confirmed that not every exclusionary effect necessarily harms competition and clarified that Article 102 TFEU does not aim to ensure that competitors less efficient than the undertaking with the dominant position should remain on the market. Indeed, competition on the merits may naturally lead to the marginalisation of less efficient competitors.
In order to categorise conduct by a dominant undertaking as abuse the Commission must demonstrate that the dominant undertaking employs methods beyond those considered part of competition on the merits. Additionally, the conduct must have the actual or potential effect of restricting competition by either excluding equally efficient competitors from the market or by hindering their growth within that market.
The ECJ upheld the GC's view that if a dominant undertaking submits evidence during the administrative procedure demonstrating that its actions could not have caused the alleged foreclosure effects, the Commission must take into account several factors such as the extent of the dominant position of the concerned undertaking, the share of market covered by the contested rebates, as well as the conditions and arrangements for granting those rebates, their duration and their amount. The Commission must also consider the possible existence of a strategy aiming to exclude competitors that are at least as efficient as the dominant undertaking from the market.
Relevance of the AEC-test
The ruling brings much-needed clarity to the application of the AEC-test, addressing long-standing uncertainties.
The ECJ confirms that, as a general rule, the capability of exclusivity rebates to foreclose competitors as efficient as the dominant undertaking must be evaluated using the AEC-test. While the AEC test is only one method of assessing whether a dominant undertaking has employed means outside the realm of "normal" competition, it specifically aims to determine whether an as-efficient competitor could replicate the conduct of the dominant undertaking and, consequently, whether such conduct could be considered competition on the merits.
The AEC test is therefore a pivotal tool in the assessment of abuse. In the Intel case, the Commission failed to conduct the thorough economic analysis necessary for a proper application of the AEC-test.
Implication
The ECJ’s ruling in the Intel case has significant implications for competition enforcement within the EU. By emphasising the necessity for a detailed, evidence-based analysis, the decision raises the evidentiary burden for proving abuse of dominance, especially in cases involving exclusivity rebates and other pricing practices. The ruling may compel the Commission to conduct more rigorous assessments, ensuring that it demonstrates whether the actions in question genuinely foreclose equally efficient competitors before concluding that they constitute an abuse of dominance.
Furthermore, the Commission may need to revise its new draft Guidelines on Exclusionary Abuse. The ECJ's ruling underlines the importance of the AEC-test in establishing a rigorous and evidence-based approach when evaluating exclusionary practices. It also clarifies that the Commission cannot rely solely on presumptions of abuse without thoroughly examining whether the conduct in question genuinely prevents equally efficient competitors from accessing the market. This may require the Commission to adjust its interpretation of “by object” abuses in its guidelines, ensuring that they reflect the need for comprehensive economic analyses in line with judicial standards.
Want to know more?
If you have any questions, please contact Plesner's EU & Competition Law team