Intel wins support in battle to overturn EU antitrust fine

Intel’s fight to overturn a record €1.06 billion European Union antitrust fine received a boost from an adviser to the bloc’s top court in a case that could have ramifications for a growing list of disputes involving US tech giants, from Google to Apple.

Intel's appeal should be totally re-examined by a lower court, which blundered by ruling against the company's system of rebates for PC makers using its chips, advocate general Nils Wahl of the European Court of Justice said in a nonbinding opinion on Thursday.

The top court will decide whether to back his views in a ruling expected within six months.

"If the court follows, this could be the most important ruling of the past 25 years because it's the complete destruction of the judgment of the General Court, but also of the European Commission's position," said Damien Geradin, a lawyer at Edge Legal in Brussels.

The lower tribunal was wrong to single out "exclusivity rebates" paid to customers who bought most or all of their chips from Intel, he said. The General Court's analysis failed to show that the rebates harmed competition.

The commission in Brussels and Intel declined to comment.

Spotlight on Apple

A victory for Intel would throw the spotlight on EU antitrust regulators facing a court clash with Ireland and Apple over the fairness of an investigation that culminated in the iPhone maker facing a €13 billion tax bill.

The Intel ruling may also affect the EU’s handling of investigations into Google and Qualcomm that could ultimately lead to fines.

Intel’s 2009 antitrust fine was the EU’s biggest, more than double the €497 million penalty against Microsoft in 2004. It represented about 4 per cent of Intel’s $37.6 billion in sales in 2008, below the maximum penalty of 10 per cent of yearly sales that regulators can impose.

In light of “the errors committed” by the General Court, Mr Wahl said a final ruling by the top tribunal was not possible at this stage.

“That is because a decision on the merits hinges upon the examination of all the circumstances of the case,” he said, and of “the actual or potential effect of Intel’s conduct on competition” in the EU.

If Intel ultimately prevails, it would be the commission's first defeat in a case concerning so-called abuse of dominance by a company for many years, said Trevor Soames, a competition lawyer in Brussels. "The line of success on the part of the commission will be stopped in its tracks.

“One of the big problems in dominance cases over the last 10 years has been a lack of confidence that, on appeal in Luxembourg, there would be a substantive review” and “that basically you were almost inevitably going to lose a dominance appeal”, Mr Soames said.

While urging a review of the case, Mr Wahl said the fact that the fine was record-breaking doesn’t necessarily mean it was inappropriate – provided it is eventually shown that Intel broke EU law.

Impeded competition

The EU’s eight-year investigation found that Intel impeded competition by giving rebates to computer makers from 2002-2005 on the condition that they buy at least 95 per cent of chips for PCs from Intel.

The EU regulator said Intel imposed “restrictive conditions” for the remaining 5 per cent, supplied by Advanced Micro Devices, which struggled to overcome Intel’s hold on the market for processors that run PCs.

Acer, Dell, Hewlett-Packard, Lenovo and NEC were among computer firms coaxed to use Intel chips, the commission said in 2009.

The EU ordered Intel to stop using illegal rebates to thwart competitors, an instruction that Intel complained was unclear.

Qualcomm will be watching the Intel case as it battles EU allegations that it paid an unidentified phone manufacturer to use its chipset. It will defend itself next month at a closed-door hearing examining a second set of charges that it sold chips below-cost to harm a smaller rival.

Added details

Mr Wahl was critical of the EU’s handling of evidence it gathered against Intel, saying the lower court was wrong to rule that regulators could add details of a meeting with a Dell executive long after the fact.

Any ruling on this point may echo challenges that Ireland and Apple are preparing against the process leading up to the EU’s tax decision in August. The appeals may argue that EU regulators unfairly kept them in the dark during the investigation and neglected to flag a shift in emphasis in the investigation, people with knowledge of their case have said.

Advanced Micro Devices, which initiated the EU antitrust case, is no longer involved in the case and did not intervene in the EU court hearings.

– (Bloomberg)