The Intel case – A significant development in the approach to abuse of dominance under EU competition law

Summary
The Court of Justice of the European Union (CoJ) has handed down a decision which means that an exclusivity rebate by a dominant undertaking will not be regarded automatically as an abuse of dominance where there is evidence that demonstrates that the effect of the conduct was not to exclude competition. In addition, the Court dismissed any distinction between formal and informal interviews conducted by the Commission during a competition investigation and so the Commission is required to record all such interviews.

The case
Intel asked the COJ to set aside the judgment of the General Court in which it dismissed Intel's action for annulment of the Commission's 2009 decision finding an abuse of dominance (i.e. in relation to conditional rebates and other restrictions intended to exclude a competitor from a computer central processing unit market) and in which a fine of €1.06 billion was imposed.

The General Court confirmed the Commission’s line of argument that loyalty rebates granted by an undertaking in a dominant position were, by their very nature, capable of restricting competition such that an analysis of all the circumstances of the case and, in particular, an "as efficient competitor test" (i.e. the AEC test) were not necessary. While the Commission 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 and that, therefore, the Intel rebate scheme could exclude such a competitor. The AEC test therefore played an important role in the Commission’s assessment of whether the Intel rebate scheme could have anti-competitive effects on as efficient competitors.

Intel appealed this (and other) findings of the General Court on the treatment of such rebates to the Court. Intel submitted that loyalty rebates may be found abusive only after an examination of all the relevant circumstances in order to assess whether the rebates were capable of restricting competition. Intel also submitted that neither the wording nor the structure of the prohibition on abuses of dominance under Article 102 of the Treaty on the Functioning of the European Union (TFEU) suggested that some types of conduct, when undertaken by an undertaking in a dominant position, must be treated as inherently anti-competitive.

The Court found that Article 102 TFEU neither prevents an undertaking from acquiring a dominant position nor does it seek to ensure that competitors less efficient than the dominant undertaking should remain on the market. Article 102 TFEU prohibits a dominant undertaking from, among other things, adopting pricing practices (such as exclusivity rebates) that have an exclusionary effect on competitors considered to be as efficient as itself and strengthening its dominant position by using methods other than those that are part of competition on the merits. As a result, not every exclusionary effect is necessarily detrimental to competition.

Where the undertaking concerned submits evidence that its conduct was not capable of restricting competition and, in particular, of producing anti-competitive effects, the Commission is required to assess such evidence. It has to be determined whether the exclusionary effect arising from such a system, which is disadvantageous for competition, may be counterbalanced (or outweighed) by advantages in terms of efficiency which also benefit the consumer. The General Court did not examine all of Intel's arguments seeking to call into question the validity of the Commission’s findings concerning the restrictive capability of Intel's rebate. Consequently, the judgment of the General Court was set aside because, in its analysis of whether the Intel rebates were capable of restricting competition, the General Court did not take into consideration Intel’s argument about the way the Commission's approached Intel's analysis of the effects of the rebates.

Separately, the Court rejected a distinction between "informal" and "formal" interviews when the Commission is collecting information during an investigation into anti-competitive behaviour. This means that the Commission must comply with the requirements to record interviews as part of its information-gathering investigation process (including during unannounced inspections).

Comment
The decision of the Court is important in relation to EU competition law on abuse of dominance. The Commission cannot simply decide that an exclusivity rebate is inherently an abuse of dominance under EU competition law where an undertaking provides evidence that its conduct would not restrict competition from equally efficient rivals. There is no reason in principle why the Irish Courts should not also adopt this effects-based approach to abuse of dominance cases brought under Irish competition law. In addition, the Commission will have to reconsider its approach and procedures in investigations into breaches of EU competition law and will need to record all interviews without distinguishing between formal and informal interviews thus underscoring the rights of the defence in such investigations.

For further information, contact Alan McCarthy or any member of the EU, Competition & Procurement Group at A&L Goodbody.

Date Published: 07 September 2017