The Commission and the CFI considered that the mere fact that Intel was a dominant supplier, and used rebates conditional on customer exclusivity, was enough to establish the infringement of abuse of dominance and trigger the substantial fine. The CJEU disagreed. It held that in such a case, it was also necessary to consider whether the conduct in question was, in all the circumstances, capable of actually restricting competition and foreclosing the market. This required consideration of:
- the extent of the undertaking’s dominant position;
- the share of the market covered by the alleged restrictive practice;
- the conditions and arrangements for granting the rebates, as well as their duration and amount; and
- whether the rebates constituted a strategy aiming to exclude from the market competitors who were at least as efficient as the dominant undertaking – the ‘as efficient competitor’ (AEC) test.
Even then, it was also necessary to consider whether the conduct was nevertheless objectively justified. This meant determining whether the exclusionary effect of the rebate system could be counterbalanced or outweighed by efficiency advantages which benefit the customer.
The judgment is a strong correction to the thinking of the CFI in its decision in Intel, and also to certain interpretations of the CJEU’s earlier decision in the Danish Post case (although not those of this firm – see our alert on that case), that certain types of rebate practised by dominant firms would necessarily constitute infringements, without the need to consider any of the criteria now clearly set out by the CJEU.
In particular the Intel judgment reconfirms the necessity to consider the AEC test. This test (which was set out in the Commission’s 2009 guidance on enforcement priorities regarding abusive exclusionary conduct by dominant undertakings) allows the dominant firm to assume that its competitor has the same cost structure when assessing whether the dominant firm’s pricing is abusive. Applying this assumption, if, having reimbursed the customer for all its lost rebates and discounts, the competitor could still sell at a profit at the same price (and assuming it had the same cost structure) as the dominant firm, then the dominant firm’s pricing is not abusive. The Intel judgment instructs the CFI to go back and check whether the European Commission had correctly applied the AEC test in its investigation leading to the imposition of the fine on Intel.
The judgment of the CJEU in Intel is very significant in its resolution of the uncertainty surrounding how to assess rebate structures practised by dominant firms. It represents confirmation of the validity of a sensible and balanced approach which requires analysis of the actual effect of the rebates on the market, and in particular resolves any doubt regarding the continued importance of the AEC test.
Client Alert 2017-210
