Intel Wins Appeal of $1.2 Billion EU Antitrust Fine
General Court decision could hamper regulator’s efforts to restrain companies with dominant market positions
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Intel, which reports quarterly earnings on Wednesday, won an annulment of a 2009 fine.PHOTO: MARIA ALEJANDRA CARDONA FOR THE WALL STREET JOURNAL
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Updated Jan. 26, 2022 10:31 am ET
BRUSSELS—Intel Corp. won an annulment of a $1.2 billion fine issued by the European Union’s antitrust regulator more than a decade ago over allegations the microchip producer had used its commercial power to squeeze out a competitor.
The court’s decision is a blow to the European Commission, the bloc’s main antitrust regulator, which is seeking to expand its reach through new regulations and a reinterpretation of its existing powers. Lawyers said a ruling in favor of Intel could put a greater burden on the commission in pursuing some antitrust cases.
The EU’s General Court in Luxembourg on Wednesday struck down much of a 2009 finding by the regulator that Intel had abused its dominant position by issuing loyalty rebates and payments that restricted rival chip maker Advanced Micro Devices Inc. from competing.
The court said that “analysis carried out by the commission is incomplete” and didn’t make it possible to establish a requisite legal standard for judging the competitive impact of rebates. Significantly, the court said it couldn’t identify the damages linked to Intel’s practices and so completely annulled the portion of the commission’s decision that related to the fine.
A central question for the court was whether the commission had completed a sufficient economic analysis to show that Intel’s alleged behavior harmed competition. Although the commission carried out an economic analysis of the case before imposing its fine, that work wasn’t assessed by the General Court when it dismissed Intel’s initial appeal in 2014.
Intel appealed to the European Court of Justice, the EU’s top court, which in 2017 sent the case back to the lower court, saying it should have examined the commission’s assessment of whether the company’s rebates shut out competitors.
EU Executive Vice President Margrethe Vestager, the bloc’s top competition regulator, said the commission would assess what it could learn from the judgment. “We will need a bit of time,” she said.
An appeal of the decision is possible, and would return the case to the Court of Justice.
The ruling comes on the same day that Intel is set to report fourth-quarter earnings. The company is expected to post lower quarterly sales amid a time of booming chip revenue, highlighting that Chief Executive Pat Gelsinger’s efforts to revive the semiconductor giant’s fortunes are a multiyear undertaking.
The chip company is expected to post $19.2 billion in sales, down 4% from the year-earlier period, according to an average of analysts surveyed on FactSet, in part reflecting the sale of its memory business. Net income is expected to be down more than 45% from a year earlier, clocking in at $3.2 billion, as Intel ramps up investments in new plants and products.
Intel in recent years has fallen behind rivals in chip making after slip-ups, and competitors have taken market share in some semiconductor categories. Mr. Gelsinger, who took over as CEO in February 2021, has been trying to reverse the decline and said in December that “it’s a five-year assignment to get all of that well and healthy again.”
Intel said it welcomed the General Court’s ruling. “We have always believed that our actions regarding rebates were lawful and did not harm competition,” Intel 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.”
The commission’s initial decision took issue with rebates Intel offered to four computer manufacturers that used its microchips between 2002 and 2007. It also said Intel made payments to a retailer on the condition that it would only sell computers that contained Intel’s microprocessors.
The court’s criticism of the commission’s initial economic analysis could make it harder for the regulator to pursue cases involving alleged abuse of dominance in the future, said Matthew Levitt, a partner at law firm Baker Botts. “It sends a warning that the commission is going to have to be careful” when companies come forward with plausible evidence about the actual effects of their behavior, he said.
The decision could have implications for another high-profile case that is currently before the courts, said Dirk Auer, director of competition policy at the International Center for Law and Economics. Google parent company Alphabet Inc. this month appealed to the EU’s Court of Justice a $2.7 billion fine for allegedly breaking antitrust laws by directing users to its own comparison-shopping ads at the expense of rival services.
The Intel ruling could make it easier for Google to argue that the commission should have done more to consider whether equally efficient competitors were, in fact, harmed by its behavior, Mr. Auer said. The ruling points to a more general principle, he said, “which is that you cannot ignore the effects of a practice, and you cannot ignore the context in which a practice is taking place.”
The Intel case, which deals with practices that took place more than a decade ago, demonstrates how long it can take for some antitrust cases to be resolved.
The EU is attempting to pass new regulations, including the Digital Markets Act, that take aim at big tech companies that some lawyers say could reduce the overall volume of cases that require separate antitrust investigations. It has also expanded its authority to review more merger cases through a reinterpretation of a longstanding law, which allows member states to refer smaller deals to the commission if they view them as concerns.
Neither of those moves likely would have a direct impact on the Intel case, but could affect the commission’s ability to handle such cases.
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