Intel and the Tale of Rebates: The (More) Economic Approach to the Rescue!

Abstract

In what should have been an exemplary case and a plea of an enforcement untamed and far away from the Chicago approach, the EU commission ruled, in 2009, that Intel, holding approximately a 70% share in the market for computer chips, in the period 2002-2007 abused its market power by putting in place essentially two types of conduct:

(i) the first one consisting of the application of rebates to five major OEMs provided they were supplied by Intel for almost their entire chips requirements. In particular, Intel allegedly structured its price policy in order to assure that, if those manufacturers sourced their chips’ supplies also from other competing manufacturers, they would have lost in toto, or to a considerable extent, their right to obtain a rebate on the vast majority of their previous orders, therefore encouraging them to stock up exclusively from Intel itself;

(ii) the second one consisting in offering payments to OEMs in order to induce them to delay, cancel or restrict the marketing of products based on the rival’s chipsets.

The second act of this narrative dates 2014, when the General Court, in endorsing the Commission's ruling, showed an unexpected upsurge of formalistic stiffening and created a kind of sub-category within by object restrictions, which, irrespective of the (still feasible, but practically unworkable) proof of their objective justification in terms of efficiencies or rather benefits to consumers, would have been considered per se capable of producing exclusionary effects vis a vis competitors. The General Court was also lapidary in intimating that there was no need to apply quantitative economic methods as to verify the existence of an infringement.

The ECJ, preceded by AG Wahl,did not agree. For the first time it appears to take into real consideration the chance that, despite the silence of the relevant provisions, conduct that somehow rings of abuse may turn out to be objectively justified or even “redeemed” by efficiency advantages, to the ultimate benefit of consumers; the judgment makes it clear that formalistic taxonomies do not obtain any longer and cannot be resorted to as a tool for preserving “the way we were”. Starting all over again is never easy; but it is better than passively submitting to an unsustainable heritage.

Keywords: Dominance, abuse, loyalty rebates, by object restriction

JEL Classification: K20, K21, K40, K42, L40, L41