ECJ issues landmark judgment on legal treatment of fidelity rebates granted by dominant companies and sets aside GC’s judgment in Intel

• 11/09/2017
• Articles

On 6 September 2017, the Court of Justice of the European Union (“ECJ”) issued its long-awaited judgment in the Intel case (Case C-413/14 P), setting aside the General Court’s (“GC”) judgment. The GC must now reassess the legality of the Commission’s decision in light of the ECJ’s ruling. Intel was supported by the Association for Competitive Technology (ACT) represented by Van Bael & Bellis partners Jean-François Bellis and Tim Kasten.

With respect to fidelity rebates, the ECJ concluded that existing case-law (in particular Case 85/76, Hoffmann-La Roche) needed clarification, and that, where an undertaking submits evidence during the administrative procedure that its conduct is not capable of restricting competition, the Commission is required to consider the extent of the dominant position, the share of the market covered by the practice, the conditions and arrangements for granting the rebates (including duration and amount) and the possible existence of a strategy aimed at excluding competitors. In effect, this creates a rebuttable presumption for exclusivity obligations and loyalty rebates.

During the Commission investigation, Intel had argued that its rebates were not capable of restricting competition, but the Commission rejected these arguments as irrelevant after concluding that the rebates were by their nature capable of restricting competition. Nonetheless, for the sake of completeness, the Commission also examined the circumstances of Intel’s rebates, and carried out an efficient competitor test (“AEC test”) to determine the capability of the rebates to foreclose as-efficient competitors, and concluded that Intel failed this test. However, the Commission stated that the AEC test did not form part of the decision and was not relied upon to find that the Intel rebates were abusive.

On appeal to the GC, Intel argued, inter alia, that the Commission had made a number of errors in applying the AEC test. The GC did not examine Intel’s arguments, agreeing with the Commission that the rebates were by their nature capable of restricting competition without need for further analysis. The GC also noted that the Commission had not relied on the AEC test analysis in its decision.

In its judgment, the ECJ faulted the GC for not examining Intel’s arguments. In light of its clarification of existing case-law, the ECJ found that the AEC test applied by the Commission played an important role in the Commission’s assessment of whether the rebate scheme was capable of having foreclosure effects on as-efficient competitors. Because the GC had not addressed these arguments, the judgment was set aside and the case was remanded to the GC.

In effect, the judgment eliminates the distinction that the GC had drawn between fidelity rebates within the meaning of Hoffmann-La Roche (“category two rebates”) and  conditional rebates that may also have a fidelity-building effect (“category three rebates”). The GC had considered that it was only in the case of rebates falling within the third category that it was necessary to assess all the circumstances surrounding the rebate. The ECJ ruling now makes it clear that this additional analysis is also required for category two rebates, at least where the dominant undertaking submits evidence that its conduct is not capable of restricting competition and producing the alleged foreclosure effects.

With respect to jurisdiction, the ECJ confirmed the position of the GC, confirming for the first time the “qualified effects” approach to jurisdiction that was previously accepted by the Commission, GC and Advocate Generals. Rejecting both Intel’s arguments and the Opinion of Advocate General Wahl, the ECJ concluded that the Commission could exercise jurisdiction over agreements with Lenovo for the supply of CPUs in China in 2006-2007 on the ground that they formed part of an overall strategy with agreements for the supply of CPUs in the EEA concluded by Intel with other companies in 2002-2005.

Finally, the ECJ confirmed that the Commission infringed Intel’s rights of defense during its investigation by interviewing a senior Dell executive without recording that interview. However, the ECJ considered that this procedural error was not capable as such of bringing about the annulment of the GC’s judgment, as Intel had not adduced any evidence to suggest that the interview included exculpatory evidence which could have been useful for Intel’s defence.