Lessons from the Intel Saga
But also — Georgia, Parliament-Commission Cooperation, Ukraine, Slovakia
Hello! Today is October 29, 2024, and here is your EU news summary for the week. Feel free to share this newsletter with friends and colleagues, and follow us on Twitter and LinkedIn.
The Briefing
On October 24, the Court of Justice of the EU delivered its final judgment in the Intel case. This ruling marks the end of twenty years of legal proceedings, yet it doesn't put to rest the debates on how to handle abuses of dominant position.
MARATHON • The Court of Justice has confirmed the General Court of the EU’s annulment of the Commission's 2009 decision to impose a fine of over one billion euros on Intel.
In 2009, the Commission concluded (after an investigation that began in 2004) that Intel had abused its dominant position in the global market for x86 computer chips. Intel notably offered rebates to computer manufacturers in exchange for guarantees that they would source almost exclusively from Intel.
According to case law, dominant companies have a ‘special responsibility’ not to harm competition. Or as Uncle Ben put it in Spiderman: “With great power comes great responsibility”.
The company appealed, but the General Court upheld the Commission's decision (2014). Intel won on its subsequent appeal: the Court of Justice annulled the General Court's ruling and sent the case back for re-examination — it considered that the General Court had not sufficiently examined certain aspects of the Commission's reasoning (2017).
EFFECTS • According to the Court of Justice, the General Court should have taken a closer eye at the Commission's reasoning on the economic analysis of Intel's behavior. Far from being anecdotal, the reasons for this referral are at the heart of the debate on how to prove the existence of abuses of dominant position.
To understand this debate, let’s go back to 2008, when the Commission published “guidance” on its enforcement priorities regarding the application of Article 102 of the Treaty on the Functioning of the EU (TFEU) — the one that prohibits abuses of dominant position — to exclusionary abuses. This guidance marked a shift from a formalistic approach to an effects-based approach in how the Commission selects cases to investigate:
The formalistic (or categorical) approach is based on the following logic: companies' behaviors can be put into specific categories and identified as more or less harmful to competition. When a company's behavior falls into certain categories, the Commission assumes the behavior is anticompetitive (based on a presumption).
Conversely, the effects-based approach relies on establishing a causal link between a company's behavior and proven negative effects on competition. It involves detailed economic analysis.
With its 2008 guidance paper, the Commission signaled its intention to focus enforcement on behaviors likely to have anticompetitive effects. However, the Commission did not intend to put this approach at the heart of its legal reasoning: economic analysis was only meant to help establish its investigation priorities.
In 2009, the Intel case became the first real-world test of this new logic. In its decision, the Commission carried out an economic analysis — for those in the know, this included “as-efficient competitor (AEC) test” — but it was not part of its main reasoning. The General Court did not pay much attention to the Commission's economic test when it validated the decision in 2014.
On appeal, Intel argued that the Commission's economic reasoning was flawed and should have been better scrutinized by the General Court. This is precisely why the Court of Justice referred the case back: it felt that the economic analysis had played an important role in the decision and should therefore be examined. When the General Court re-examined the case, it highlighted significant flaws in the Commission's economic analysis and annulled the fine. On October 24, 2024, the Court of Justice confirmed the General Court's decision.
Jean-François Bellis, who worked on the Intel case, notes: “The [Commission’s] Intel decision contained 150 pages (…) of economic analysis, including the AEC test, but the AEC test was performed as a game. (...) There were gaps in the analysis. I am sure that if the Commission staffers who played those games would have known that they would be subject to judicial review, they would have played them very differently, or perhaps not at all.”
In a way, the Commission dug its own grave.
SCOPE • Since 2017, several other judgments have confirmed the importance of economic analysis. In August 2024, the Commission presented its draft guidelines (intended to replace the guidance) on Article 102 and exclusionary abuses.
In these draft guidelines, the Commission acknowledges the content of the case law but seems to want to return to a formalistic approach based on presumptions. The Commission’s reasoning is the following: “overly rigid implementation of the effects-based approach could set the bar for intervention at a level that would render enforcement against practices that restrict competition unduly burdensome or even impossible, with serious negative consequences for consumers, the EU economy and society at large”. Conversely, an overly formalistic approach could lead to punishing behaviors that have no or limited anticompetitive effects.
The Commission has opened consultations on its draft guidelines. The guidelines seem to go against the grain of the Court of Justice's judgment in Intel, as the latter favors the effect-based analysis — and does not mention the word “presumption” once.
WHAT'S NEXT • The Intel case started 20 years ago. In his report on competitiveness, Mario Draghi criticized “decade-long cases like the Intel case” and called for making proceedings easier to navigate for companies.
Mario Draghi also commented on the Commission's draft guidelines: he says they are too vague and leave excessive discretion to the Commission.
The Intel saga is not over yet. In September 2023, the Commission re-adopted parts of its 2009 decision concerning Intel’s alleged naked restrictions and imposed a 376 million euros fine on the company. These parts of the decision were not called into question by the General Court and the Court of Justice. However, the two courts annulled the overall 1 billion euro fine because they were unable to tell which part of the fine was linked to conditional rebates and which part was linked to naked restrictions.
In Case You Missed It
GEORGIA • On October 26, Georgian citizens voted in parliamentary elections opposing the pro-European opposition and the ruling Georgian Dream party which is controlled by pro-Russian oligarch Bidzina Ivanishvili. The latter ended up winning the elections with 54% of the vote.
Georgian Dream has been in power since 2012. Georgia’s current president, Salome Zurabishvili, was elected in 2018 under the party's banner, but has gradually distanced herself from it, notably because of the pro-Russian and anti-European tendencies of its members.
Salome Zurabishvili denounced what she calls the “total falsification” of the elections due to Russian interference. The elections were marked by numerous cases of fraud. The opposition is calling on citizens to demonstrate against Russian interference, only a week after the Moldovan referendum on the inclusion of EU accession in the constitution, during which 130,000 citizens were allegedly bribed by Russia.
The President of the European Council, Charles Michel, called on the Georgian electoral commission to investigate the ‘irregularities’ observed during the ballot. These comments were echoed by Ursula von der Leyen speaking at College of Europe on Monday, and by the EU’s top diplomat, Josep Borell. Viktor Orbán welcomed the victory of Georgian Dream.
The election results cast a shadow over Georgia’s prospects to join the EU. The country was granted candidate status in December 2023, but negotiations have ground to a halt following the government's pro-Russian turn and the adoption of a law on foreign influence that considerably curtails the freedom of the media and NGOs.
PARLIAMENT • On October 21, the European Parliament and the European Commission agreed on nine cooperation principles aimed at strengthening the interaction between the two institutions and ensuring greater transparency. These principles, unveiled by Ursula von der Leyen and Roberta Metsola, will form the basis of a new Inter-institutional Framework Agreement, with the previous framework dating back to 2010.
The timing is significant: this political agreement comes just a few weeks before the parliamentary hearings of the Commissioners-designate. The European Parliament is therefore in a good position to ensure that its demands are taken into account.
Many principles have simply been updated. Others are more innovative: for example, the Commission commits to providing “full justification and information” in the event of Article 122 of the TFEU being used. This article allows the Council to take urgent measures on a proposal from the Commission — in this specific procedure, Parliament has no say.
Article 122 was used in particular during the Covid crisis and the energy crisis. Although subject to conditions, its use was extended during von der Leyen's first term, under criticism from the European Parliament.
The European Parliament could vote on the details of the agreement in November, before MEPs vote on the whole College of Commissioners. On the Council’s side, the Member States' ambassadors take a dim view of the concessions made by the Commission, particularly with regard to Article 122.
UKRAINE • On October 22, the European Parliament approved a 35 billion euros loan to Ukraine.
This proposal, supported by a vast majority in Parliament, aligns with the G7's plan to unlock $50 billion to support Ukraine's war effort. Although the Council has already given its approval, the future of the aid remains uncertain.
The aid will be funded using interests accumulated on Russian assets frozen by European sanctions since the beginning of the war in 2022. These sanctions are currently renewed every six months: any Member State can block the renewal and thus jeopardize the aid (sanctions are voted on unanimously within the Council).
To reassure G7 lenders — notably the US — the Commission has proposed modifying the renewal mechanism. One option under consideration is to renew the sanctions every 36 months. However, Hungary has announced that it will block this proposal until the results of US presidential elections.
SLOVAKIA • On October 22, the Commission unlocked a grant of 799 million euros from the Recovery and Resilience Facility (RRF) for Slovakia, after determining that the Slovak government met the criteria on combating corruption and strengthening the independence of the judiciary.
The Slovak government managed to reassure the Commission by reinstating criminal penalties for EU fund fraud, which will now be punished more severely than fraud involving national public funds.
Slovakia had become the EU's new “rule of law headache” after announcing the abolition of EU fund fraud offenses and the closing of the specialized anti-corruption and serious crime prosecutor's office in 2023.
Investigations by this specialized prosecutor's office had led to numerous convictions of individuals linked to the left-wing populist party Smer, Prime Minister Robert Fico’s party. Fico, a nationalist allied with Hungarian Prime Minister Viktor Orbán and close to Moscow, faced significant protests in the capital, with the opposition accusing him of trying to protect his allies.
Robert Fico eventually reinstated penalties for EU fund fraud, but the Commission continued to block recovery plan funds after the Slovak Constitutional Court declared his reforms were constitutional on July 3. A Commission spokesperson said discussions are ongoing between Slovak authorities and the Commission to clarify outstanding issues.
What We’ve Been Reading
Zach Meyers of the CER cautions against tailoring competition policy reforms to fit the U.S. model, contending this approach may be unsuitable for the EU economy.
In Silicon Continent, Pieter Garicano argues that Europe’s lag in innovation is due to a shortfall in private, rather than public, R&D investment.
This edition was prepared by Augustin Bourleaud, Antoine Langrée, Noé Piloquet, Luna Ricci, Antoine Ognibene, Lucie Ronchewski, and Maxence de La Rochère. See you next week!