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European Commission's First Use of More Economic Approach in Abuse of Dominance Cases

January 1, 0001

 

Earlier today, the European Commission issued a historic decision finding that Intel Corp. has abused its dominant position in the market for x86 microprocessors and setting a record €1.06 billion (US$ $1.44 billion) fine. This fine is the largest ever imposed by an antitrust regulator, and reflects the size of the market, the seriousness of Intel’s violations and the length of the abusive conduct.

O’Melveny’s Brussels team has represented Intel’s main competitor, AMD, a complainant in the case, since 2003, after which time the Commission issued two Statement of Objections against Intel and, today, the decision.

In a press release issued today, the Commission stated, “The decision contains a broad range of contemporaneous evidence that shows that AMD, essentially Intel's only competitor in the market, was generally perceived, by computer manufacturers and by Intel itself, to have improved its product range, to be a viable competitor, and to be a growing competitive threat. The decision finds that Intel's practices did not constitute competition on the merits of the respective Intel and AMD products, but rather were part of a strategy designed to exploit Intel's existing entrenched position in the market.”

The decision covers essentially three types of abusive practices:

  • The provision of what is described as “wholly or partially hidden” rebates on condition that Intel’s customers bought all, or almost, all their x86 CPUs from Intel.
  • Payments to Europe’s largest retailer on condition that it exclusively sells Intel-based PCs.
  • Interfering with the relations between AMD and its customers by making payments to computer makers - unrelated to any particular purchases from Intel - in return for the computer makers either postponing or cancelling altogether the launch of products incorporating AMD microprocessors.

While the Commission’s decision was not formally subject to the principles set out in the Commission’s 2008 “Guidance on its enforcement priorities in applying Article 82 to abusive exclusionary conduct by dominant undertakings.”, it is clear from the Commission’s public statements that it has indeed applied an as efficient competitor test. Furthermore, the Commission stated that it does not object to rebates as such but to the conditions that Intel attached to those rebates. The Commission decision therefore does not signal a return to the traditional caselaw on conditional rebates and the Commission’s analysis in this case was significantly more sophisticated and thorough than the kind of almost per se rulings that for instance Michelin II represented. It is also important to note that the third type of abuses was unrelated to the pricing mechanisms used by Intel and therefore does not relate to the Commission’s assessment of conditional rebates.

The Commission’s investigation lasted almost nine years, starting in 2000, and is probably the most extensive investigation ever handled by the Commission, including two rounds of surprise inspections (“dawn raids”) at Intel’s premises in Europe as well as the offices of several computer makers and retailers, ultimately leading to a case file covering “several hundred thousand pages”.