Chillin'Competition

Relaxing whilst doing Competition Law is not an Oxymoron

Breaking news- The Intel Judgment is out: the European Commission wins

with 2 comments

Minutes ago the General Court released its Judgment in Intel v Commission (T-286/09) dismissing the appeal in its entirety and upholding the 1.06 billion euros fine.

 As I noted to Bloomberg some time ago, the ECJ’s Tomra Judgment had paved the way for the Commission’s victory in this case with regard to the substantive arguments at issue.  Indeed, the Judgment resorts to Tomra in several occassions to support the key proposition that once a loyalty mechanism is demonstrated there is no need to demonstrate effects by means of an as efficient competitor (AEC) test (see mainly para. 145; I’ve spotted a few other references to Tomra in paras: 72, 73 , 77, 78, 91, 97, 103, 117, 119, 120, 132, 153, 176, 182, 184, 193, 527 or 998, plus a few more to AG Mazak’s Opinion in that case)

The General Court has also ruled out the procedural concerns previously identified by the Ombudsman, ruling that there was no procedural irregularity, and that even if there had been one it wouldn’t have affected the outcome of the case (paras. 601-664).

The Judgment has not yet been made public   is available here. [Note: this post was initially written in the light of the Court's Press release and was subsequently updated  following a first very quick look at the actual Judgment]. I’ve only had the chance to skim through it quickly, but a quick look is enough to reveal the Judgment’s likely impact on the law on abuse of dominace and to anticipate that this ruling will no doubt stir many debates in the coming weeks and months.

The Court has found that the rebates are issue were “exclusivity rebates” and declared that these, “when granted by an undertaking in a dominant position are, by their very nature, capable of restricting competition and foreclosing competitors“. The Judgment states that in the face of such rebates it is not necessary to show effect on a case-by-case basis, and that “the Commission was not required to make an assessment of the circumstanced of the case in order to show that rebates actually or potantially had the effect of foreclosing competitors from the market“. Against this background the Court explicitly rejects the applicability of the “as efficient competitor test“.  A similar approach is undertaken with regard to the conditional payments granted to several computer manufacturers.

Key to the Court’s reasoning is the idea that a foreclosure effect occurs not only where access to the market is made impossible for competitors. Indeed, it is sufficient that that access be made more difficult”. (paras 88 and 149). According to para 150 the as efficient competitor test “only makes it possible to verify the hypothesis that access to the market has been made impossible and not to rule out the possibility that it has been made more difficult”.

In para 152 the Court distinguishes Intel from previous cases where the as efficient competitor test had been a key criterion (namely TeliaSonera, Deutsche Telekom and Post Danmark) by observing that “those cases concerned margin squeeze practices or low price practices)” which means that a price-cost comparison was needed. According to this para. “[a] price cannot be unlawful in itself. However, in the case of an exclusivity rebate, it is the condition of exclusive or quasi-exclusive supply to which its grant is subject rather than the amount of the rebate which makes it abusive”. In para. 153 the Court again resorts to Tomra (“which postdates” the above mentioned Judgments) to support its view that no effects assessment is needed.

The Judgment deals directly with the alleged incompatibility of this approach and the Commission’s Guidance paper. In paras. 154-161 the Court explains essentially that it is “not necessary to consider whether the contested decision is in line with the Article 82 Guidance” (157) because the latter only set priorities for cases initiated following its adoption whereas the Intel investigation was already at an advanced stage by then (paras. 155-156). According to the Court, the as efficient competitor test envisaged in the Guidance paper was only relied upon by the Commission “for the sake of completeness”.

In spite of the clear statement of principle regarding the no need to prove effects, the Court has also engaged in a detailed case by case review of both the rebates and the conditional payments and concluded that “even supposing that the Commission was required to show on a case by case basis that the exclusivity rebates and payments granted to Dell, HP, Lenovo and Media-Saturn were capable of restricting competition, the Commission demonstrated that capability to the requisite legal standard in its analysis of the facts of the case”.

This “just in case” review is what explains the  lenght of the Judgment (283 pages in English). It also places the Commission in a much better position regarding an eventual appeal, for even if the ECJ were to quash the GC’s conclusions that effects didn’t have to be established (the upcoming Post Danmark II Preliminary Ruling will tell us whether that is or not likely to happen), the factual assessment of the case -beyond the scope of review of the ECJ- would be most likely to stand.

Even if somehow expected, this is a very important victory for the Commission. The main question relates to how this Judgment will impact future post-Guidance paper enforcement.

 

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Written by Alfonso Lamadrid

12 June 2014 at 9:43 am

2 Responses

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  1. Doesnt the GC brings in the art 101 object/effect distinction into the art 102 discourse when it says that exclusivity rebates are “by their very nature” anticompetitive and thus negative effects are “inherent” in these and therefore there is no need to prove actual/potential effects?(paras 80-87 of the judgment also cited in the blogpost)
    This would be a strange convergence without any support from the text of the treaty provisions…

    Asimo

    13 June 2014 at 8:56 pm

  2. The Court actually uses the words “by object” quite explicitly (§ 203 et seq of the judgment). Reasoning in terms of object/effect in Art 102 cases is not new (see T-203/01 Michelin II, §241). As to the lack of explicit support in the text of the treaty provisions, this is common to both object and effect, none of which is mentioned in 102 (in defining abuse).

    Eric

    16 June 2014 at 9:55 am


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