European Court Of Justice Provides Important Clarification On When Rebates Can Be An Abuse Of Dominance

Author:Mr Richard Ryan, Florence Loric and Patrick Horan
Profession:Arthur Cox
 
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INTRODUCTION

On 6 September 2017, the European Court of Justice ("ECJ") handed down judgment in Intel v. Commission,1 one of the most important abuse of dominance cases to come before the courts in recent years. The ECJ's decision, which overturns in part an earlier ruling of the EU General Court ("GC"), moves the analysis of rebates offered by dominant companies away from a strict form-based approach and endorses an effects-based approach. The decision is likely to have a significant impact on the manner in which such cases are investigated by competition authorities in the future.

BACKGROUND

The case arose from a challenge brought by Intel against a European Commission decision in 2009 in which the Commission found that Intel had abused its dominant position in the market for x86 central processing microchips through a system of "exclusivity" rebates. The Commission had found that the rebates granted by Intel were conditional on customers buying all or most of their x86 processors from Intel, and formed part of a strategy by Intel to drive its rival AMD from the market. The Commission imposed a then-record fi ne of €1.06 billion for breach of Article 102 of the Treaty on the Functioning of the European Union, which prohibits abuse of dominance.

Intel appealed to the GC, which dismissed Intel's case in its entirety in June 2014.2 Notably, the GC found that loyalty rebates of the kind used by Intel when granted by dominant companies were "by their very nature" exclusionary without the need for the Commission to investigate their competitive effect or the circumstances in which they were granted.

Intel appealed the GC's judgment to ECJ, asserting that the GC had erred in law in failing to examine the rebates at issue in light of all the relevant circumstances. Intel also cited fi ve other grounds of appeal, including in relation to alleged procedural flaws in the Commission's treatment of information obtained from third parties during the course of the investigation.

THE ECJ'S JUDGMENT

In a judgment notable for its brevity and clarity, the ECJ upheld Intel's primary ground of appeal that the GC had failed to examine the rebates in light of all the relevant circumstances of the case. The ECJ clarified that exclusivity rebates granted by a dominant company are not per se anticompetitive, but instead must be analysed by the Commission to determine, on the basis of factual and economic evidence available, whether they are capable of restricting...

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