Intel judgment of CJEU (C-413/14 P)
If a dominant company provides evidence that fidelity rebates are not capable of restricting competition, the European Commission (or national competition authority bringing proceedings) must now examine that evidence, subject to review by the European Court (or national court).
Article 102 TFEU prohibits the abuse of a dominant position by an undertaking occupying such a position in a substantial part of the EU. A region, port, or a route in the case of an airline, may suffice.
The granting of quantitative rebates, linked solely to the volume of purchases, fixed objectively and applicable to all possible purchasers – as opposed to being based on estimates made for each customer according to its presumed capacity – would be presumed not to be abusive.
Article 102 has, however, prohibited schemes involving rebates or discounts which are expressly conditional on customers buying all or most of their purchases from the dominant undertaking – whether expressed as a target or a percentage of total purchases. These are known as 'loyalty' or 'fidelity' rebates. Actual proof that they are capable of restricting competition has not been required (Hoffmann La-Roche v Commission 85/76, British Airways v Commission T-219/99, C-95/04).
When the European Commission fined Intel, a dominant manufacturer of central processing units, €1.06 bn in 2009, it applied this reasoning to condemn rebates offered to computer manufacturers such as Dell, Lenovo and IBM. It also carried out an assessment of whether an as efficient competitor (AEC) would have had to offer prices which would not have been viable for it, such that the scheme was capable of foreclosing such a competitor. It concluded that it would have.
Intel challenged this assessment on appeal to the General Court, which rejected the appeal on the ground that it was not necessary for it to consider whether the Commission had carried out this further assessment correctly.
On appeal by Intel against this judgment, however, the Court of Justice of the European Union has set aside the General Court's judgment and referred the matter back for the General Court to examine Intel's arguments in this regard.
In so doing, the CJEU has moved away from previous case law which applied an 'inherently anticompetitive '/ per se prohibition approach, and has required that where a dominant company submits, on the basis of supporting evidence, that its conduct was not capable of restricting competition and, in particular, of producing the alleged foreclosure effects, the Commission is obliged to review that evidence.
In conclusion, if a dominant company being investigated provides evidence that rebates are not capable of restricting competition (eg due to short duration, market coverage of rebates, market share trends, efficiency of competitors or their capacity to meet demand), the Commission (or competition authority bringing the proceedings under Article 102) must now examine that evidence. In its judgment the General Court will in due course be carrying out such an assessment, which may provide further clarity.
John Milligan is author of European Competition Law in the Airline Industry (Kluwer 2017)
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