EU Court of Justice Advocate-General deems that Intel’s appeal, in case C-413P, against a 1,06 billion euro fine should be upheld

The European Commission (Commission) by decision of 13 May 2009¹ (Decision), applied a 1.06 billion euro fine to US microchip manufacturer Intel, for having allegedly abused its dominant position in the market for x862 central processing units (CPUsx86), in breach of Article 102 of the Treaty on the Functioning of the European Union (TFEU).

Per Commission’s standing, Intel abused its dominant position on the worldwide market for CPUsx86 from October 2002 to December 2007, by implementing a strategy aimed at excluding a competitor, Advanced Micro Devices Inc. (AMD), from the market. The Commission considered that Intel held a dominant position on the grounds that it had a market share of roughly 70% or more, and that it was extremely difficult for competitors to enter the market and to expand as a result of the unrecoverable nature of investments to be made in research and development, intellectual property and production facilities. In accordance with the decision, the abuse was characterised by several measures adopted by Intel vis-à-vis its own customers (computer manufacturers) and a European retailer of microelectronic devices. Accordingly, Intel granted rebates to four major computer manufacturers (Dell, Lenovo, HP and NEC) on the condition that they purchased from Intel all, or almost all, of their CPUsx86. Similarly, Intel supposedly awarded payments to the European retailer of microelectronic devices, which were conditioned on the latter selling exclusively computers containing Intel’s CPUsx86. According to the Commission, such rebates and payments induced the loyalty of the four manufacturers and of the retailer, and thus significantly diminished the ability of Intel’s competitors to compete on the merits of their CPUs.

Intel brought an action against the Commission’s decision before the General Court of the European Union (GCEU) (case T-286/09), seeking the annulment of the sanctionatory decision or, subsidiarily, a reduction of the applied fine.

Intel appealed said ruling to the Court of Justice of the European Union (CJEU) raising several grounds for judicial review – case C-413/14P, pending. The Advocate General delivered on 20 October 2016 a non-binding opinion on the merits of Intel´s appeal.

Concerning the first ground of appeal, the Advocate General underlined in its opinion that the GCEU found that the rebates granted by Intel to Dell, HP, NEC and Lenovo are exclusivity rebates and, because of such classification, did not consider it necessary to consider the capability of such rebates to restrict competition. The Advocate General recalled the principle arising from the CJEU’s jurisprudence concerning the presumptive abusiveness of loyalty rebates, but noted that in practice the CJEU has consistently taken into account “all the circumstances” when determining whether the impugned conduct amounts to abusive conduct. The Advocate General sustained that the GCEU erred in finding that exclusivity rebates constitute a separate and unique category of rebates that require no consideration of all the circumstances in order to establish an abuse of dominant position. Further, the Advocate General sustained that the GCEU erred in law in its alternative assessment of capability of the conduct by failing to establish, on the basis of all the circumstances, that the rebates and payments offered by Intel had, in all likelihood, an anti-competitive exclusionary effect.

As regards the second ground of appeal, the Advocate General recalled that the GCEU considered sufficient to make a global assessment of the part of the market which was excluded on average during the 2002 to 2007 period. On that basis, the court a quo deemed irrelevant that the market coverage was considerably smaller during the years 2006 and 2007. Per the Advocate General’s standing, in following such approach, the GCEU discontinued the criterion of s“ufficient market coverage” and therefore failed to ascertain that the conduct at stake was capable of restricting competition in 2006 and 2007. If it had not failed to do so, it would have had to establish that such a small tied market share is inconclusive for the purposes of establishing a restriction of competition, which cannot be remedied by applying the concept of a s“ingle and continuous infringement”. The Advocate General therefore suggested that Intel’s second ground of appeal should be upheld.

As regards the third ground of appeal, the Advocate General argued that no autonomous category of “exclusivity rebates” existed. However, even if the CJEU would disagree with this interpretation, the Advocate General maintained that this ground of appeal should be upheld on the basis that “exclusivity rebates” would be conditional upon the customer purchasing “all or most” of its requirements from the dominant undertaking, which is not satisfied, from his standpoint, in the assessed case, as HP and Lenovo could still purchase significant quantities of CPUsx86 from AMD.

Observing the fourth ground of appeal, the Advocate General recalled that EU legislation required the Commission to record interviews to ensure that undertakings suspected of infringing EU competition rules can organise their defence, and EU courts could review whether the Commission exercised its powers within the law. Consequently, in his standing, the GCEU erred in law in ruling that the Commission was not in breach of EU law by failing to organise and record a meeting as required under the applicable due process of law rules. The Advocate General further stated that such a procedural irregularity could not be remedied by the Commission a posteriori, via a note included in the file, as such note did not record the substance of the interview that the Commission had with an executive of a manufacturing company. The Advocate General, as such, deemed that Intel’s fourth ground of appeal should also be upheld.

Assessing the fifth ground of appeal and the theme whether the Commission had jurisdiction under international law to bring proceedings against Intel for its anti-competitive conduct, the Advocate General was not convinced that Intel’s alleged abuse could be considered to have been implemented in the European Economic Area (EEA). In his perspective, the GCEU failed to assess whether the anticompetitive effects stemming from certain agreements between Intel and Lenovo had the capacity to produce any immediate, substantial and foreseeable anticompetitive effect in the EEA and therefore the GCEU erred in applying the “qualified” effect criterion to dismiss Intel’s arguments regarding the Commission’s lack of jurisdiction.

In a nutshell, the Advocate General argued that the GCEU’s confirmatory ruling should be set aside and the case referred back to the court a quo to examine all the circumstances of the case and the actual or potential effect of Intel’s conduct on competition in the market.

In any event, one must take into account that the opinion of the Advocate General is not binding on the CJEU. The duty of the Advocate General, pursuant to Article 252, § 2, TFEU, consists exclusively in proposing to the CJEU, acting with complete impartiality and independence, reasoned submissions on cases which, in accordance with the CJEU’s statute, require his involvement.

One must now wait to verify if this reasoned, non-binding, opinion of the Advocate-General, that proposes a material and more effect-based approach on supposedly abusive conduct, linked inter alia to discounts granted by an undertaking in a dominant position – in discontinuation of a mere formal and a per se fulfillment of the requirements regarding Article 102 TFEU under the current judicial acquis – is adopted by the CJEU.

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