Europe’s top court hears Intel and sends € 1.06 bn antitrust fine to review

Last week the European Court of Justice, Europe’s highest court, ruled that US chipmaker Intel’s € 1.06 billion ($1.26 billion) antitrust fine be re-examined by a lower court. The ECJ found that the General Court, which upheld the hefty fine imposed on Intel by the Commission for abuse of a dominant position in the market, did not examine carefully enough Intel’s position, and so sent back the case to be reconsidered. The move not only represents a victory for Intel, but could also open a new chapter in antitrust cases involving US tech giants such as Google and Qualcomm.

Background

On May 13, 2009, the European Commission imposed a fine of €1.06 billion on US-based microchip manufacturer Intel for having abused its dominant position on the market for x86 central processing units (CPUs), in infringement of the competition rules of the EU and the European Economic Area. According to the Commission, Intel abused its dominant market position by implementing a strategy aimed at foreclosing its main competitor, Advanced Micro Devices Inc. (AMD), from October 2002 to December 2007.

At the time, the Commission said Intel’s abuse was characterised by several measures like offering rebates on the sale of CPUs to some computer manufacturers like Dell, Lenovo, HP and NEC on the condition that they purchased from Intel, and by paying a retailer, Media-Saturn-Holding, to sell computers with only Intel chips installed in them. According to the Commission, those rebates and payments induced the loyalty of the four manufacturers listed above and of Media-Saturn, and thus significantly diminished the ability of Intel’s competitors to compete on the merits of their x86 CPUs. Therefore, the Commission imposed a € 1.06 bn fine on the Santa Clara, California-based company in 2009, an action that was supported by the General Court in a 2014 decision, which dismissed an appeal by Intel against the fine.

Last week’s surprise

However, Intel challenged again the judgment of the General Court before the Court of Justice, by saying that that General Court failed to examine more thoroughly its arguments when assessing its appeal. The General Court allegedly “erred in law by failing to examine the rebates at issue in the light of all the circumstances of the case”, as declared by the ECJ. So last Wednesday Europe’s highest court said in an official statement that, whilst the Commission had emphasised that the rebates at issue were by their very nature capable of restricting competition, “it nevertheless carried out an in-depth examination of the circumstances of the case in its decision, which led it to conclude that an as efficient competitor would have had to offer prices which would not have been viable”.

In its official statement, the Luxembourg-based ECJ said that, as a consequence of the General Court failing to examine all of Intel’s arguments concerning the efficient competitor test (‘AEC test’) in particular, it therefore “sets aside the judgment of the General Court as a result of that failure in its analysis of whether the rebates at issue were capable of restricting competition”. “The Court refers the case back to the General Court so that it may examine, in the light of the arguments put forward by Intel, whether the rebates at issue are capable of restricting competition”, the document said.

Reactions

Wednesday’s ruling means that the years-long battle between the EU and Intel may drag on for potentially longer. “We welcome today’s landmark ruling,” Intel general counsel Steven Rodgers said. “While this case concerns events that happened more than a decade ago, we have always believed that our actions were lawful and did not harm competition. We look forward to the next step in this process, in what is a respectful disagreement between Intel and the EC’s competition regulators”.

“I cannot comment how companies will proceed or assess the judgment”, the New York Times quoted Ricardo Cardoso, a spokesman for the Commission, as saying at a news conference last week. “We ourselves still have to look carefully into the details of the judgment”. The chipmaker’s stock was up 2 percent, to $35.72, in midday trading in New York on Sept. 7.

Future impacts

The move by the Court of Justice clearly raises the prospect that the 2009 fine could be reduced, but it does not strike down the original ruling. Intel is still likely to be fined in the European Union as well as to receive precise instructions on how to drive its business activities in the bloc. However, last week decision may also represent a new starting point in competition cases in the region. The EU’s antitrust watchdog has indeed many open cases on the desk against US-based tech giants, such as Google, Microsoft and Apple, which have generally tended to accept EU anti-trust penalties so far. Many now see last Wednesday’s ruling as a door for those companies to see fighting the EU in court as a viable option.

Veronica Roberts, a London-based partner at Herbert Smith Freehills, told the New York Times last week that the ruling on Wednesday could ultimately give businesses “more confidence that they could win a case on appeal if they come under investigation”. Andrew Ward, a partner at Madrid-based law firm Cuatrecasas, told Reuters days before last week’s judgement that a loss in such a high-profile case would, for the ECJ, be “embarrassing”, adding that it might mean that some long-established processes would need to be “reassessed”. “Losing against Intel would clearly be a blow to the Commission and a confidence boost for Google, since on the face of it the theory of harm is much more established in the Intel case”, he said.

Companies like Qualcomm, which faces EU charges of using anti-competitive methods and of making illegal payments to a major customer, and Google, accused over its Android smartphone operating system and online search advertising, indeed could be the most directly affected by the ruling. Google currently faces a € 2.4 billion penalty in Europe, which represents the EU’s biggest fine of all time, surpassing the former € 1.06 bn record related to the EU vs Intel long standing dispute. The Mountain View, California-based company appealed yesterday against the record fine in attempt to overturn a EU decision imposed in July.

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