Intel Corporation's European Union Antitrust Case
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Case Code: ECON068 Case Length: 17 Pages Period: 2009 - 2018 Pub Date: 2018 Teaching Note: Not Available |
Price: Rs.500 Organization : Intel Corporation Industry : Computers, IT and ITeS Countries : Europe Themes: Market Structure, Competition, Business Law |
Abstract Case Intro 1 Excerpts
"This decision is the right one for business, consumers, and E.U. antitrust law and policy. Exclusivity rebates are no longer considered in the E.U. as inherently anticompetitive. The bottom line for Intel is that Intel lives to fight another day."
– Dave Anderson, an antitrust partner in the Brussels office of the law firm, Berwin Leighton Paisner, commenting on the Court of Justice of the European Union’s (CJEU) ruling ordering the General Court to reexamine Intel’s appeal against EU fine, in September 2017.
"It forces the Commission to be as economic in its approach in other cases as it did in Intel. This is encouraging for Qualcomm and Google."
– Rein Wesseling, a partner at law firm Stibbe, commenting on CJEU's ruling in favor of Intel, in September 2017.
Introduction
In September 2017, the Court of Justice of the European Union (CJEU), the European Union's (EU) top court, ordered the General Court to re-examine the € 1.06 billion fine levied on Intel Corporation (Intel), the world’s largest semiconductor company. In 2009, Intel was fined by the European Commission(EC) for alleged anticompetitive practices. The EC alleged that Intel had abused its near-monopoly in the computer processor market by coercing manufacturers to purchase all their chips from it instead of rivals such as Advanced Micro Devices (AMD). The EC found that between October 2002 and October 2007, Intel aimed to exclude AMD from the x86 microprocessors market. The Commission also found that Intel had given exclusive rebates to personal computer and server manufacturers such as multinational computer technology companies Dell, HP, Lenovo, and NEC. Intel had also made payments to Media-Saturn on the condition that that the latter sold PCs with only Intel microprocessors. Thus, the EC ruled that the rebates offered and payments made by Intel made it difficult for other manufacturers to compete with it, reducing the choice for consumers.
Ever since Intel was asked to pay the € 1.06 billion fine, the chipmaker had been seeking to have the judgment overturned. In 2014, it appealed to the General Court stating that the imposed fine was huge. However, in June 2014, the General Court upheld the € 1.06 billion fine against Intel. In its ruling, the court stated that the penalty was proportionate to Intel's anticompetitive practices. The court added that the EC had not acted harshly in imposing the fine, which amounted to 4.15 percent of Intel's turnover in 2008 against a maximum possible fine of 10 percent. Consequently, Intel had 70 days' time to decide whether to appeal to the CJEU. Intel continued to deny that it had broken antitrust laws and repeatedly stated that rebates and discounts were legal and were a common practice for rewarding companies buying its microprocessors in large quantities. But antitrust officials maintained that Intel's way of offering exclusivity rebates to gain the loyalty of computer makers was anticompetitive in itself and no other proof of harm was required to deem the company’s actions as illegal.
In August 2014, Intel appealed to the CJEU to overturn the General Court's decision. In April 2016, Nils Wahl (Wahl), advocate general at CJEU, questioned whether Intel's actions had really harmed competitors. According to Wahl, "Intel's appeal against the imposition of a 1.06 billion euro fine for abuse of its dominant position should be upheld. The case should be referred back to the General Court for a fresh review." Wahl added that the General Court had failed to establish that the payments and rebates offered by Intel were anticompetitive and that certain deals between Intel and Lenovo had actually harmed consumers in Europe. After investigating Intel's actions, in September 2017, the CJEU ruled that the General Court could re-examine the fine against the company. The CJEU in its ruling decided in the case of Intel, the 'as-efficient-competitor' (AEC) test should be properly evaluated by the General Court. The General Court had to look into Intel's legal arguments more closely, giving Intel a chance to have the antitrust fine reduced or annulled. Commenting on the CJEU's ruling, Steven Rodgers, Intel's general counsel, said, "We welcome today's landmark ruling. 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." Analysts stated that though the CJEU’s ruling did not strike down the original ruling by the EC, its decision to send the case back to the General Court was a good sign for companies looking to offer rebates to consumers in exchange for exclusitivity deals.
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