On 24 October 2024, the Court of Justice of the European Union (CJEU) delivered its highly anticipated judgment in European Commission v Intel, bringing to an end the long-running saga on the lawfulness of Intel’s loyalty inducing rebates. In this article, we set out a summary of the proceedings leading up to the CJEU’s latest ruling, the key points from the judgment, and their implications for future enforcement.

In 2009, the European Commission fined Intel €1.06 bn (the highest penalty imposed on a single company at the time) for abusing its dominant position in the market for personal computer processors through the use of loyalty rebates and certain other practices aimed at excluding competitors’ products. 

After 15 years of appeals, the CJEU has now upheld the General Court’s annulment of the Commission’s decision in respect of Intel’s loyalty rebates. In doing so, the CJEU reiterated that not all exclusivity obligations or incentives implemented by dominant companies are detrimental to competition, and that to find an abuse of a dominant position in this case, the Commission had to demonstrate that Intel’s rebates had the actual or potential effect of foreclosing competitors that were as efficient as the dominant undertaking, considering all the relevant factual circumstances.

A long-running saga 

The proceedings leading to the CJEU’s judgment have been extensive and convoluted, spanning almost exactly 24 years. 

The Commission’s infringement decision

The case against Intel originated from a complaint lodged with the Commission by AMD in October 2000. This led to an investigation by the Commission into Intel’s conduct regarding the worldwide supply of x86 central processing units (x86 CPUs), a key component of personal computers. During the period examined by the Commission, Intel maintained a dominant position with a market share of over 70% – its only real competitor being AMD. 

In May 2009, the Commission issued a decision finding that Intel had infringed Article 102 of the Treaty on the Functioning of the European Union (TFEU) by implementing a strategy aimed at foreclosing AMD from the market for x86 CPUs through two distinct types of conduct. 

1. Loyalty rebates: Intel granted rebates to four computer manufacturers (Dell, Lenovo, HP and NEC) on the condition that they purchased all or almost all of their x86 CPUs from Intel, and awarded payments to a large retailer, MSH, on condition that it exclusively sold computers containing Intel x86 CPUs.
2. Naked restrictions: Intel awarded payments to three computer manufacturers (HP, Acer, and Lenovo) to incentivise them to postpone or cancel the launch of computers containing AMD x86 CPUs or place restrictions on the distribution of such products.

According to the Commission, these rebates and payments significantly diminished the ability of Intel’s competitors to compete on the merits of their x86 CPUs, resulting in a reduction of consumer choice and lower incentives to innovate.

The first General Court judgment 

Intel appealed to the EU General Court in respect of the Commission’s findings on the loyalty rebates. The General Court dismissed that appeal in its entirety in 2014. Controversially, the General Court held that, in finding that the loyalty rebates were inherently capable of restricting competition, the Commission was not required to carry out an in-depth examination of all the relevant factual circumstances. Nor was the Commission required to show that the rebates were capable of excluding a competitor that was as efficient as Intel, through the correct application of the so-called “AEC test” (which assesses whether a hypothetical as-efficient competitor could compete for a share of the dominant undertaking’s sales, by compensating customers for the loss of the contested incentives without sustaining losses). 

The first CJEU judgment and the second General Court judgment

Intel successfully appealed the General Court’s judgment to the CJEU, which in 2017 held that the General Court had erred in its approach, referring the case back to the General Court for an examination of whether the loyalty rebates were capable of restricting competition in view of Intel’s arguments to the contrary. 

Notably, the CJEU ruled that where a firm under investigation disputes that exclusivity-inducing rebates granted by it were capable of foreclosing competition, the Commission must analyse the following criteria in order to establish an abuse: 

1. the extent of the firm’s dominant position on the relevant market; 
2. the share of the market covered by the challenged practice; 
3. the conditions and arrangements for granting the rebates in question; 
4. the duration and size of the rebates; and 
5. the possible existence of a strategy aiming to exclude competitors that are at least as efficient as the dominant firm from the market. 

Following a re-examination of the case, in 2022 the General Court annulled the Commission’s decision in respect of the loyalty rebates. In doing so the General Court held that the Commission had committed an error of law by concluding that Intel’s rebates were by their very nature anticompetitive, such that there was no need to demonstrate their capability to foreclose competitors. Further, the Commission had committed various errors in its application of the AEC test, and had insufficiently analysed the market coverage and duration of Intel’s rebates. 

While the General Court upheld the Commission’s findings of infringement in respect of the “naked restrictions”, it quashed the €1.06 bn fine entirely, as the Commission had not, in its decision, indicated the proportion of the penalty that related to each head of abuse. 

The CJEU’s recent judgment, and its implications

The judgment

It is against this background that, following an appeal brought by the Commission, the CJEU has now upheld the General Court’s 2022 judgment.

The Commission put forward various arguments as to why the General Court’s judgment should be overturned, including that the General Court had: (i) misinterpreted and misapplied the criteria laid down by the CJEU in 2017; (ii) erred in its approach to the standard of proof; (iii) infringed the Commission’s rights of defence; (iv) distorted the evidence in its assessment of the Commission’s AEC test in relation to certain manufacturers; and (v) incorrectly assessed the consequences of the errors in that test. 

Each of the Commission’s arguments was rejected in turn by the CJEU. The General Court had not erred in concluding that the Commission’s decision failed to establish, to the requisite legal standard, that Intel’s loyalty rebates were capable of producing exclusionary effects. Nor had it erred in finding that there were manifest errors in the AEC test carried out by the Commission (including as to the time periods and “contestable shares” of Intel’s sales adopted by the Commission for that purpose) that warranted the overturning of the finding of infringement. It was also not for the General Court to examine whether the exclusionary effects of Intel’s rebates could nevertheless be established through reasoning that was not coherently set out in the Commission’s decision. 

In reaching these conclusions, the CJEU reiterated the following.

• Article 102 TFEU does not aim to prevent firms from acquiring a dominant position on their own merits, or to ensure that less efficient competitors remain on the market. Consequently, not every exclusionary effect is detrimental to competition.
• In order to find an abuse of dominance, the Commission must demonstrate that the dominant undertaking’s conduct departed from competition on the merits, and had the actual or potential effect of restricting competition by excluding competitors that are as efficient as the dominant firm itself. The Commission’s demonstration of the effects of the conduct must, in all cases, take into account all relevant factual circumstances, including in relation to the conduct itself, the relevant market, and the functioning of competition.
• As regards loyalty rebates in particular, where a firm under investigation submits, with supporting evidence, that rebates granted by it were not exclusionary, the Commission must assess whether they were capable of excluding as-efficient competitors from the market. As a general rule, this is to be done using the AEC test. This is a hypothetical test, and does not turn on whether the dominant firm’s competitors were actually excluded from the market. 

Implications for the Commission

The CJEU’s judgment may require the Commission to refine its recently published draft Guidelines on exclusionary abuses. These draft Guidelines – which we analysed in detail in our recent article – are aimed at facilitating a more effective enforcement of Article 102 TFEU.

In particular, the draft Guidelines seek to extrapolate from EU case law certain presumptions that can be applied to recognised categories of conduct. As regards loyalty rebates, the draft Guidelines propose that incentive schemes that are conditional on customers purchasing all or most of their requirements from the dominant firm are presumed to depart from competition on the merits and be capable of producing exclusionary effects. Whilst this presumption is rebuttable, it purports to shift the burden of proof away from the Commission, with it being for the dominant firm to adduce sufficient arguments and evidence to establish its rebates’ lack of exclusionary effects. Such a presumption and shifting of the burden of proof is, however, very difficult (if not impossible) to reconcile with the CJEU’s statements in this latest judgment.

More generally, the draft Guidelines can be seen as an attempt by the Commission to distance itself from the AEC test, including by minimising references to “as efficient” competitors, and emphasising the possible relevance of the effects of exclusionary conduct on less efficient competitors. Again, this is difficult to square with the CJEU’s judgment, which effectively states that, in every contested case concerning loyalty rebates, the Commission is required to apply the AEC test.

Finally, while the matter of Intel’s loyalty rebates appears settled, the saga continues on another front: naked restrictions. Following its defeat in 2022, the Commission reissued a €375m fine against Intel, specifically in respect of the naked restrictions identified in its 2009 decision. Intel has appealed that new fining decision, and the appeal is currently pending.