The European Commission recently imposed a record fine of €1.06 billion on Intel Corporation for breaching EU competition law. Following an eight year investigation, the Commission found that Intel had abused its dominant position in the market for computer chips (specifically x86 central processing units) between October 2002 and December 2007.
Intel is widely regarded as the biggest computer chip maker in the world and over the period in question held at least 70% of the worldwide market. Whilst holding such a dominant position is not in itself prohibited, the Commission found that Intel had taken unfair advantage of their market power by:
- giving substantial loyalty rebates to computer manufacturers which obtained all or the vast majority of their requirements from Intel;
- making direct payments to a major retailer on the condition that it only stocked products with the relevant Intel components; and
- paying computer manufacturers to delay or cancel the launch of specific products which contained competing components.
This conduct, both individually and collectively, aimed to exclude Intel's main rival (AMD) from the market by undermining its ability to compete on the merits of its products. In effect, Intel was exploiting its entrenched market strength to influence customer choice and restrict the availability of competing products.
In addition to this record fine, the Commission has also ordered Intel to cease the practices in question (to the extent that it has not already done so) and it will actively monitor Intel's compliance with the decision. Intel may also find itself subject to damages claims from third parties who have suffered loss as a result of Intel's abusive conduct and will have to endure the bad publicity which will inevitably follow today's decision.
This case emphasises that companies which hold a dominant position in a market have a special responsibility not to abuse that position. A dominant company may still compete aggressively in the market provided that it competes on the merits of its products. The company may not, however, take unfair advantage of its dominance to preserve or increase its market position by undermining its competitors and their products.
It should also be noted that abuse of dominance is not just a concern for large corporations such as Intel or Microsoft. Indeed any entity which holds a market share of 50% or more could well be considered to be dominant in that particular market. In such a case, that entity would be well advised to consider its business practices to ensure that it is not engaging in conduct which may constitute an abuse of market power.
Disclaimer
The material contained in this article is of the nature of general comment only and does not give advice on any particular matter. Recipients should not act on the basis of the information in this e-update without taking appropriate professional advice upon their own particular circumstances.
