EU reverses $1.2 billion Antitrust fine imposed on Intel in 2009

An antitrust fine of 1.06 billion euros ($1.2 billion) levied against U.S. chipmaker Intel, in 2009 was reversed by a European Union court on Wednesday, January 26th, 2022.

Nearly 13 years ago, the European Commission penalized Intel for granting rebates to computer manufacturers Dell, Hewlett-Packard, NEC, and Lenovo in an attempt to keep a competitor, Advanced Micro Devices Inc., out of the market.

The fine was the largest ever for anti-competitive behaviour in the EU at the time, based on the value of Intel’s European chip sales. It was alleged that Intel abused its dominant position in the global market for “x86 2” data centre processors between 2002 and 2007, according to the commission, by implementing a strategy to keep competitors out of the market.

After the fine against Intel in 2019, it went ahead to file a case against the commission in 2014, the General Court, however, upheld the fine. Intel, not discouraged by the turn of events, appealed the decision to the European Court of Justice, which it won in 2017. The European Union’s top court remanded the case to the General Court for reconsideration, instructing the lower court to investigate Intel’s allegations that the rebates were not anti-competitive.

The sanction was rejected by the General Body, a constituent court of the Court of Justice of the European Union, on Wednesday, claiming that the commission failed to conduct a proper economic study of a rebate system.

According to the Commission, Intel’s commercial activity toward its trading partners was characterized by two forms of commercial conduct: naked restrictions and conditional rebates.

After a second look, a five-judge bench agreed with Intel that the commission had failed to show that it was impending competitors illegally. In a statement, the court said, “The analysis carried out by the Commission is incomplete and, in any event, does not make it possible to establish to the requisite legal standard that the rebates at issue were capable of having, or were likely to have, anticompetitive effects, which is why the General Court annuls the decision.”

Intel was revealed to have given rebates to four strategic original equipment manufacturers (OEMs) on the condition that they purchase all or almost all of their x86 central processing units (CPUs) from Intel. Dell (DELL) – Get Dell Technologies Inc Class C Report, Lenovo (LNVGF), Hewlett-Packard (HPQ) – Get HP Inc. Report, and NEC (NIPNF) were the four OEM makers.

Rebates, particularly those granted by dominant corporations, are often disliked by regulators, who believe they are anti-competitive. Companies, on the other hand, argue that regulators must prove rebates have anti-competitive impacts before they may be sanctioned.

Intel is presently analyzing the decision, according to a spokeswoman for the company. “When we have concluded our initial review,” they continued, “we will provide more comments.” According to Assimakis Komninos, a partner at a law firm, White & Case, the verdict will make the regulator’s job more difficult.

“This is a significant win for Intel. It raises the bar for the Commission when it comes to bringing dominance charges. For each situation, it will have to do an effects-based analysis. This will affect all businesses “he stated.

Meanwhile, in the after-hours trade, Intel shares plummeted more than 1%. The stock ended Wednesday’s regular trading session roughly 1% higher at $51.69 after the European Union’s antitrust regulator granted it a reprieve from a $1.2 billion sentence levied more than a decade ago.

Last quarter, Intel’s earnings dipped 1.35% as the business increased investment in new facilities and products as part of Chief Executive Officer Pat Gelsinger’s efforts to turn around the semiconductor giant’s fortunes. The chipmaker reported revenues of $20.5 billion in the fourth quarter, up 3% from the year before. The company’s net income was $4.6 billion, down 21% from the previous year.

After slipping behind rivals in chip manufacturing, the American semiconductor powerhouse is undergoing a period of change, with competitors gaining market dominance in some semiconductor categories. Gelsinger, who took over as CEO in February 2021, has been attempting to reverse the company’s downward spiral and stated in December that his recovery plans could take five years or more.

According to Gelsinger, chip scarcity is beginning to ease in some sectors, but it still has the potential to last until 2024. “It’s still difficult,” he remarked. “You’ll just see consistent progress, quarter after quarter.” Gelsinger told analysts, “We just have a lot of catching up to do in terms of capital footprint.”

In 2021, Intel announced significant chip-making investments in Arizona and New Mexico, as well as a $95 billion commitment to Europe. Sapphire Rapids, the company’s next-generation server chip, is expected to begin delivering this quarter, with production ramping up in the second quarter, according to Gelsinger. Analysts were concerned that the chip, which is made using a new method, would be delayed.

Mobileye, a company focused on self-driving car technologies, reported $356 million in revenue for the quarter, up 7% year over year. Intel announced in December that it intends to sell the unit in an initial public offering (IPO).