EU Court Annuls Landmark European Commission "Abuse of Dominance" Antitrust Decision

Jones Day

The EU General Court's decision reverses a €1.06 billion "abuse of dominance" fine against Intel related to loyalty rebates.

The EU General Court ("GC") annulled the European Commission's €1.06 billion antitrust fine imposed on Intel in 2009 for allegedly abusing its dominant position in x86 Central Processing Units ("CPUs") by offering loyalty rebates to customers, excluding competitors such as AMD. The GC held that the Commission's analysis was incomplete and failed to establish anticompetitive effects to the requisite standard.

The GC initially upheld the Commission's decision, but on appeal, the EU Court of Justice disagreed, holding that such rebates are not per se unlawful and must instead be reviewed under a standard that evaluates the net competitive effect of the rebates. As detailed in our 2017 Alert, if the dominant company submits, on the basis of supporting evidence, that its conduct was not capable of foreclosing competitors, the Commission must conduct a fulsome competition analysis, including whether the rebates could foreclose competitors that are as efficient as the dominant company.

The GC's latest decision analyzes how the Commission applied the "as-efficient competitor test" ("AEC test") and took into account other relevant criteria such as the share of the market covered by the rebates, as well as their duration and amount. The GC found several shortcomings and factual errors, holding that the Commission had not met its evidentiary burden.

The Commission can appeal the ruling to the Court of Justice, albeit on points of law only.

Looking Ahead

The Commission has a long track record of success in dominance cases in the courts. The ruling is therefore a significant setback for the Commission's agenda. In particular, the GC's findings related to factual shortcomings and mistakes set a high standard for future Commission economic analyses. The GC also stressed the importance of the presumption of innocence, stating that any residual doubt should benefit the defendant.

The ruling is the latest example of the GC holding the Commission to high burdens of proof to show anticompetitive effects (see 2020 Alert regarding merger reviews). The GC's rulings are likely to encourage the Commission to be more selective in pursuing legally difficult cases and focus on its proposals for increased regulation in certain sectors, as it is currently doing with the Digital Markets Act.

Although the decision sets a high evidentiary standard for the Commission, particularly in rebate cases, the judgment does not exclude that some rebates may still have anticompetitive effects, and the Commission may still be able to challenge rebates if it believes that a company with a large market position has engaged in anticompetitive conduct. To avoid and minimize such risks, companies must carefully evaluate the procompetitive aspects of their pricing and rebate practices and be prepared to explain—with supporting evidence—to the Commission why such practices are not capable of foreclosing rivals.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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