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EU court rejects Intel's appeal against €1 billion fine for abuse of market dominance

An EU court has dismissed Intel's appeal against a €1.06 billion fine served to it for a breach of competition rules.12 Jun 2014

The EU's General Court upheld the penalty, which was imposed by the European Commission in 2009, after dismissing claims by the microchip giant that the fine was disproportionate.

The Commission had ruled that Intel breached rules that prohibit companies from abusing a dominant market position when it offered rebates on the sale of central processing units (CPUs) to some computer manufacturers and by paying a retailer, Media-Saturn-Holding, to sell computers with only Intel chips installed in them.

The Commission also found that Intel had paid three computer manufacturers to delay, cancel or restrict the launch or distribution of computers containing CPUs made by its main rival, Advanced Micro Devices (AMD). Intel had also engaged in efforts to try to conceal its infringing activities, the regulator had ruled.

The Commission concluded that Intel had pursued a strategy of trying to foreclose  AMD from the CPUs market between October 2002 and December 2007. This conclusion was supported by the General Court.

"The Commission proved to the requisite legal standard that [Intel] implemented a long-term comprehensive strategy to foreclose AMD from the strategically most important sales channels," the Court said in its ruling.

Among the arguments claimed by Intel in its appeal was that its payment of rebates to some computer manufacturers constituted actions of "normal competition" which did not infringe competition rules. The General Court said, though, that: "restricting customers’ freedom to source from the dominant undertaking’s competitors falls outside the scope of competition on the merits".

The General Court ruled that the rebates it offered could be classed as 'exclusivity rebates' and that they are, by their very nature, almost always anti-competitive when paid by a market dominant company.

"Such exclusivity rebates, when applied by an undertaking in a dominant position, are incompatible with the objective of undistorted competition within the common market, because they are not based — save in exceptional circumstances — on an economic transaction which justifies this burden or benefit but are designed to remove or restrict the purchaser’s freedom to choose his sources of supply and to deny other producers access to the market," the General Court said. "Such rebates are designed, through the grant of a financial advantage, to prevent customers from obtaining their supplies from competing producers."

"The question whether an exclusivity rebate can be categorised as abusive does not depend on an analysis of the circumstances of the case aimed at establishing a potential foreclosure effect," it said.