EU Court Backs Intel's Appeal of 2009 Fine, in Blow to Regulator -- 2nd Update

By Natalia Drozdiak Features Dow Jones Newswires

The European Union's highest court on Wednesday backed Intel Corp.'s appeal of a EUR1.06 billion ($1.26 billion) EU antitrust fine in 2009, referring the case back to a lower court and dealing a blow to an antitrust regulator that has taken a hard line on U.S. tech giants.

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The decision could embolden companies challenging the European Commission, the bloc's antitrust authority, in court over competition decisions--cases the regulator typically wins. It could also force the commission to re-examine its strategy in several ongoing cases.

The Intel case centers on whether a dominant company--in any industry--abuses its commercial power by offering rebates to business customers to retain their market position. The commission in 2009 argued that the chip maker violated the bloc's antitrust rules because dominant companies' use of rebates are by nature restrictive of competition.

The European Court of Justice said in a statement that the lower court failed to examine whether Intel's rebates to other companies restricted competition.

The decision signals that dominant companies' use of rebates aren't de facto problematic, meaning that regulators may now have to prove in each case that the rebate measures offered cause economic harm. That could make it harder for the commission when it seeks to lodge another such antitrust case.

"This is certainly a defeat for the European Commission and indicates a certain relaxation of the formalistic case law on abuse of dominance," said Assimakis Komninos, a Brussels-based partner at law firm White & Case. "While the Intel case is about rebates, all major corporates being investigated by the commission can take this as a positive sign."

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The ruling could have ramifications for other abuse-of-dominance cases, including the regulator's antitrust probe into Qualcomm Inc., which it accuses of illegally paying Apple Inc. to exclusively use its chips and selling chips below cost to force a competitor, Icera Inc., out of the market.

Most recently, the EU levied a record EUR2.42 billion fine against Alphabet Inc.'s Google in June for abusing its market position with its shopping service. Google has said it is considering an appeal.

In future appeals to antitrust decisions, the EU regulator won't be able "to defend its decision on the basis of narrow legal grounds as the general court will have to look at the economic arguments" put forth by the company, said Damien Geradin, a partner at competition law firm Euclid Law.

The ECJ ruling could also give dominant companies more freedom over how they offer rebates and discounts. As a result, it may also unintentionally make rules for compliance murkier.

"The commission takes note of today's ruling by the European Court of Justice and will study the judgment carefully," the commission said. "It is now for the general court to review the commission decision under the framework set out by today's judgment."

Intel welcomed the ruling. "While this case concerns events that happened more than a decade ago, we have always believed that our actions were lawful and did not harm competition," said Steven Rodgers, the company's general counsel.

In the Intel case, the commission penalized the company over rebates it granted to four major computer manufacturers--Dell Inc., Hewlett-Packard Co., NEC Corp. of Japan and Lenovo Group--for using its microchips between 2002 and 2007.

The antitrust authority found that Intel had used the rebates, coupled with its dominant position, to lock rival Advanced Micro Devices Inc. out of the market, reducing choice for consumers. The EU also said Intel made payments to electronics retailer Media Saturn Holding on the condition that it only sold computers containing Intel's microprocessors.

While the commission argued the company's rebates were by their nature anticompetitive, it also carried out an in-depth analysis of the circumstances, proving the rebate scheme was capable of shutting out a rival.

Intel appealed the decision to the EU's general court. The court in 2014 backed the commission's first argument that dominant companies' rebates are by nature potentially anticompetitive--a decision Intel then appealed to the ECJ.

Write to Natalia Drozdiak at natalia.drozdiak@wsj.com

(END) Dow Jones Newswires

September 06, 2017 10:09 ET (14:09 GMT)