The present article aims to emphasise the fine line between protecting the competition or the consumer’s interests within Competition Law. Whilst it has already been stated (CJEU, GSK Services Unlimited v Com., 2009) that competition authorities seek not only to protect consumers’ benefits, but also markets’ structure, it is interesting to observe the impact that the consumers’ harm or lack thereof may have on the finding of a breach, such as the abuse of dominant position.
Certainly, one cannot deny that, while examining the effects on the market of an abusive practice, we shall also take a glimpse at the effects it has on the consumer. But what happens when no such harm can be identified and, however, an infringement is found and penalised with no less than the record-breaking fine of €1.06 billion? This was one of the many question that arose in the doctrine, after the Intel Decision was issued, leaving the historical fine applied to Microsoft (€561 million) far behind. While this appears to be ‘the price to pay’ for ‘cheating’ in competition law, it is not hard to assume why much controversy emerged with so many urging interests at stake. Thus, I intend to present the issue of consumer harm in the light of competition law, seen throughout the Intel Case (CJEU, Intel Corp. v Com., 2014).
In order to accomplish that, it shall be drawn to the reader’s attention the definition of the abuse of dominant position, along with the tendencies occurring towards this anticompetitive practice, in order to conclude whether an effect-based analysis should be the future of analysing any anticompetitive practice.
As a preliminary observation, the verge of the debate appears to be whether identifying an impairing effect on the market and a consumer’s harm is or not necessary for an infringement to be found. On one hand, it has been stated (Collino, 2011) that although an abusive conduct is not necessarily an anticompetitive one, abuses, per se, cannot be approved in a community which recognises the rule of law (CJEU, Ahmed Saeed v Comm., 1989). Thus, an abuse of dominant position can occur under condition of no actual harm, but purely a potential one. However, this position severely damages a dominant’s freedom of action on a competitive market, as the one on which Intel acted, where decreasing prices, increasing output, and constant innovation are required (Geradin, 2009).
To begin with, an abuse of dominant position is an anticompetitive conduct currently covered by Article 102 of the Treaty on the Functioning of the European Union (TFEU). It mainly expresses a breach of the special responsibility incumbent to a position of dominance. In order to identify an abuse of dominant position, an algorithm can be applied.
Firstly, dominance can be identified on a relevant market. This implies some specific tests referring to factors such as substitutability and the product’s capacity to be interchangeable. In the Intel Case, the market identified by the European Commission (herein after the Commission) was that of Central Processing Units [CPUs] (the brains of a computer, in non-technical words). Once this aspect settled, the Commission went further on to prove that Intel was a dominant undertaking on the relevant market, and that Intel conducted an abusive practice.
With regard to the first issue, the Commission referred to Intel’s market share among with the barriers to entry, which both seemed to express its dominance. However, Intel brought into the Court’s attention that the continuously descending prices that characterise the market of CPUs along with a countervailing buyer power (the power that its contractual partners had) considerably diminishes its independence and might have repercussions with regard to its qualifications as a dominant. Unfortunately, these arguments were ignored.
The second issue was whether the rebates offered by Intel were of such nature as to be seen as abusive. Mainly, Intel offered conditional discounts along with payments made to its customers for not launching or postponing the launch of products that contained CPUs manufactured by its competitor, Advanced Micro Devices Inc.[AMD]. However, in order for such a practice to represent an abuse of dominant position, it has to preclude competition on the respective market or on a significant part of it in so far it may affect trade between Member States. This appeared to be the field for the most intense battles between the parties: determining the effects that Intel’s conduct had on the market.
The Intel Case brought into light a new perspective upon the abuse of dominant position. It was argued that an abuse of dominant position with no foreclosure effect (Intel actually proved that AMD’s market share grew during the period in which the practice took place) should no longer be seen as a breach. This position towards assessing an abuse appears to be on the same line of reasoning with the new guidelines (Guidance Paper) and discussion papers (Competition discussion paper on the application of Article 82 of the Treaty to exclusionary abuses). Nonetheless, even the Commissioner Kroes declared (Kroes, 2005) that they intend to ‘revamp’ the analysis of the abuse of dominant position - a justified intention if we were to observe that, especially in the cases of low pricing and rebates, they are to be welcomed and not ‘punished’ (Geradin, 2009). After all, discounts are beneficial to consumers.
Therefore, all case-law that used to see rebates as a per se abuse was heavily criticised by economists and businessmen. In this regard, the US Courts had a more relaxed and economic-oriented point of view. They considered that as long as low prices are not predatory ones (prices set in order to wipe out competitors off the market), they are at the very heart of competition and any inference should, therefore, be seen with a sceptical eye.
Moreover, the rebate-system established between Intel and Dell (one of its buyers) was not written. In order to prove a breach, the Commission had to prove that the rebates limited Dell’s freedom of choice and imposed it to buy all or nearly all of their x86 CPUs from Intel. In doing so, the Commission allowed itself to work with many assumptions, constantly relying on-not-so-reliable pieces of information as emails (Geradin, 2009). Moreover, reducing consumer’s choice and ‘stealing’ your competitor’s clients is the mere purpose of any rebate. However, rebates still have to permit a reasonable access to other products. For example (Geradin, 2009): you might want to buy a different brand of yogurt that the one selected by your supermarket; as long as you have a reasonable access to other brands, that rebate is not anticompetitive. Whether this access was actually denied to Intel’s consumers was not proven by the Commission.
In conclusion, neither the Commission, nor the CJEU have offered much importance to the new effect-based analysis. Unfortunately, they continued to apply the abuse of dominant position for ‘big fish in high profile markets’ (Tupper, p.1) and restrained Intel’s freedom to ‘compete normally on a tough market”’ without taking into consideration the lack of consumer harm, the fact that AMD was far from being actually affected by Intel’s conduct and that such conducts were held on a very aggressive market. These decisions, thus, appear to contradict the healthy tendencies emerging since 2005, imposing an enormous fine with little evidence of any harm. Hopefully, this type of rationale will not become a milestone in following case-law, permitting, thus, the normal development of competition law towards a more economic and effect based analysis – which should, at least in my opinion, be the future of any assessment of breach under competition law.