Companies such as Google Inc. and Qualcomm Inc. could benefit in pending antitrust cases from a ruling by the EU’s highest court allowing Intel Corp. to fight claims that its pricing policies hurt competition.
The European Court of Justice (ECJ) doesn’t often rule on competition cases, and it rules against the European Commission even less frequently. Its Sept. 6 ruling giving Intel another shot at appealing a 1.06 billion-euro ($1.26 billion) fine in effect hands the EC a defeat by reversing a lower court decision that completely affirmed the EC’s case.
The opinion also answers some questions about how companies can defend themselves against abuse of dominance challenges in the EU — issues that are front and center in the high-profile cases against Google and Qualcomm ( Intel Corp. v. European Commission , E.C.J., C 413/14 P, 9/6/17 ).
“Intel and other firms in EU’s cross-hairs will surely take heart by the court’s concern with proof of effects,” Eleanor Fox, an antitrust professor at New York University School of Law, told Bloomberg BNA. Still, she cautioned, “The impact of the judgment is ambiguous” because the ECJ simply faulted the lower court for not analyzing the competitive impacts the EC claimed.
The court didn’t say the EC was wrong in finding that Intel’s loyalty rebate program for customers deliberately froze out competitors. It just said the lower court must review the commission’s analysis. That means several more years of litigation, including a possible second appeal to the ECJ.
For Intel, the ruling means a fresh review of its arguments that its rebates never actually hurt competition. The lower court had ignored those arguments in Intel’s initial appeal, saying the EC didn’t have to prove harm because Intel’s loyalty program presumptively violated competition law.
The decision also affirms that companies are entitled to a full review of the factors that weigh into a commission decision. If the competition commission conducted a market analysis and used it in deciding that Intel broke the law, Intel is entitled to attack that analysis on appeal, the court said.
“Where supporting evidence is produced, the commission must take seriously any arguments showing that the practice is not capable of having effects on competition,” wrote Pablo Ibanez Colomo, associate professor at the London School of Economics in a blog post.
In 2009, the commission concluded that Intel kept rival Advanced Micro Devices (AMD) out of the market for specific computer chips by offering discounts to customers who agreed to purchase most of their chips from Intel, a practice called exclusive dealing.
Exclusive dealing — in this case through loyalty rebates — can be illegal when the company imposing restrictive deals on customers has a commanding market share. At the time, Intel supplied around 70 percent of the chips running computers and required customers to take 95 percent of supply from Intel to get the discount.
In 2014, the EU’s General Court rejected Intel’s appeal of the decision and the fine. Intel then appealed to the highest court.
The case against Intel is heavily cited in the commission’s case against Google. If the court next finds that the commission botched its analysis in concluding that Intel harmed the market, that could harm the commission’s case against Google. In June, the EC fined Google 2.4 billion euros ($2.7 billion), saying the search-engine giant skewed results in its favor to thwart smaller shopping search services.
“Google is a very different case,” Fox said. But Google “might feel that its case is strengthened by the focus on effects” of the abuse of dominance, which wasn’t a focus in analyzing this type of case until now.
The case likely effects the EU’s case against Qualcomm, currently charged with abuse of dominant market position for offering loyalty rebates and predatory pricing.
The Intel opinion “marks a crucial development in the law,” Alfonso Lamadrid de Pablo wrote in a blog post. Lamadrid, a principal associate at Brussels law firm J&A Garrigues S.L.P., said labeling conduct “per se” anticompetitive “will not automatically mean a home run for the commission.”
The opinion also answers broader questions about how regulators handle abuse of dominance cases, Cleveland-Marshall College of Law antitrust professor Christopher Sagers told Bloomberg BNA. Especially in high tech, there is a concern that antitrust law works too slowly to keep up with market changes, he said.
“I think this nicely shows how that is not the case, at least not always,” he said. AMD is “alive and well and is a fierce and increasingly important competitor to Intel in Europe.” The court’s confirmation that “anticompetitive restraints will actually be policed” will make Intel think twice about using similar conduct in the latest round of its long battle with AMD.
Ideally, that will mean Intel will do what competition law protects, he said — “fight for sales by making a better product or selling it more cheaply.”
The ECJ held that the lower court had a duty to address Intel’s attacks on the commission’s market impact analysis because they formed a part of the commission’s decision. The competition commission could start with the presumption that Intel’s rebates hurt AMD. But once Intel put forth evidence that such harm was impossible, the commission was obligated to fully analyze the rebates’ "capacity to foreclose” efficient competitors from the market.
It follows that if the commission carries out that analysis, the court must consider the dominant firm’s arguments on appeal.
The ECJ also considered and denied two more of Intel’s six grounds for appeal, rejecting Intel’s claims that its procedural rights were violated and that the commission lacked jurisdiction to reach its discounts to Lenovo Group Ltd. On any future appeal to the ECJ, therefore, Intel may have four arguments the court would have to address.
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The court's opinion is at http://src.bna.com/shE.
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