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Intel decision spells trouble for Vestager’s Google campaign

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EU competition chief Margrethe Vestager hadn’t taken up her post in Brussels when the European Commission levied a €1 billion antitrust fine on Intel, but she now has to pick up the pieces of a court debacle that could influence the fate of her record Google antitrust penalty.

The EU’s lower court last week annulled the fine imposed on Intel in 2009 and hammered most of the Commission’s case. The decision may signal troubles down the road for pending cases, competition experts say, including the legal fight over the largest antitrust fine the EU has ever imposed: Vestager’s €4.34 billion penalty on Google for abusing the dominance of its Android operating system.

The court’s harsh judgment represents a painful blow for the Commission, which hadn’t lost a big antitrust case in more than 20 years. It signals that the Commission is facing more rigorous scrutiny from the judges in Luxembourg, while critics say the decades-long case shows that antitrust procedures need an overhaul. Intel’s win also comes at a sensitive time: The U.S. chipmaker is reportedly planning a multibillion-dollar expansion in Europe just as the bloc tries to boost its semiconductor production amid a global shortage.

“The main consequences of this judgment could be on the Android case, where exclusivity agreements play an important role,” said Friso Bostoen, a competition law expert at Leuven University.

When the European Commission’s competition arm, then led by Neelie Kroes, fined Intel for abusing its dominance in the market for x86 processors between 2002 and 2007, rebates were at the heart of the case. The company engaged in anti-competitive practices to exclude its main rival at the time, the Commission said in 2009, by offering illegal rebates and payments to computer makers and retailers not to use its rival’s products.

But the EU General Court faulted the Commission’s evaluation of Intel’s actions in the case.

“The Commission’s analysis is incomplete and does not make it possible to establish to the requisite legal standard that the rebates at issue were capable of having, or likely to have, anti-competitive effects,” the court said on Wednesday, nearly 13 years after the fine was levied.

“This ruling is likely to have an impact on how the court looks at other cases, like the pending Qualcomm exclusivity rebates case,” said Zach Meyers, senior research fellow at the Centre for European Reform.

In 2018, Brussels fined chip maker Qualcomm almost €1 billion for abusing its market dominance and making payments to Apple, one of its key customers, to ensure it did not source chips from Qualcomm’s rivals. The company’s appeal of the fine is still before the courts.

It doesn’t bode well for the Android case either, at least the part relating to the EU’s findings on exclusivity contracts that Google reached with mobile device manufacturers and telecoms operators between 2011 and 2014. These contracts meant that Google shared part of its search revenues with companies that agreed to exclusively pre-install Google search across their entire portfolio of Android devices. This is one of the types of agreements that allowed Google to bolster its dominance in search, according to the Commission.

In a week-long hearing last year, the Commission’s analysis of these revenue-sharing agreements came in for special scrutiny from the court in Luxembourg.

“Revenue-share agreements are even more at risk than they seemed during the hearing, when some judges were quite skeptical of the Commission’s analysis on this point,” Bostoen said. “It is clear now that this is the weakest point of the Android case.”

While in the past the court has tended to opt for a lighter touch on economic analysis, the Intel case indicates that judges in Luxembourg were willing to look into all the minutiae of Brussels’ determinations, experts said. This ruling suggests the judges are conducting a deeper scrutiny of the EU’s cases.

“This ruling means that the Commission has to do a lot of work to be able to prove anticompetitive effects,” Meyers said.

The Commission “can’t just say that some rebates are always anticompetitive, and it can’t rely on a rough ‘back-of-the-envelope’ analysis. It needs a detailed, robust analysis to prove that they have anticompetitive effects,” Meyers added.

Intel’s win may also encourage other companies to challenge the Commission in court, in particular in cases where it claims that a conduct is inherently anti-competitive.

“So far, Commissioner Vestager has taken a very different approach from her predecessor: Settlements have been off the table,” said Nicolas Petit, professor at the European University Institute in Florence. “This judgment could change that. Deeper analyses means that antitrust cases will require more resources, while parties will have a stronger hand to convince the Commission to settle.”

The Intel ruling comes as the bloc is discussing a set of new regulations aimed at reining in the power of Big Tech companies. It may add momentum to the legislative efforts to change competition rules with the the Digital Markets Act, experts say.

Intel’s win caps, for now, a long legal saga. The EU’s lower court in 2014 dismissed the U.S. chipmaker’s appeal. That decision was overruled by the European Court of Justice, which, in a 2017 judgment, referred the case back to the General Court to examine Intel’s arguments.

Intel welcomed the ruling by the General Court “as we have always believed that our actions regarding rebates were lawful and did not harm competition,” General Counsel Steve Rodgers said. “The semiconductor industry has never been more competitive than it is today and we look forward to continuing to invest and grow in Europe.” 

More than 20 years after the first complaints, the ball is now in Vestager’s court. The EU competition czar said the Commission will need to study “what we can learn from the ruling” before deciding its next steps.

Apart from an appeal back to the European Court of Justice, one alternative for the Commission would be to do the investigation again, taking into account the court’s guidance. Both options would extend the saga even more.

“What we need is an urgent, speeding up of antitrust procedures,” BEUC’s Director for Legal and Economic Affairs Agustín Reyna said.

“It cannot take so long for the conclusion of a case in which there are such serious competition concerns raised.”

Simon Van Dorpe contributed to this story.

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