Jurisdiction - Singapore
News
Singapore – Intel Case Clarifies Position On Anti-Competitive Rebates… Or Does It?

11 February, 2015


On 12 June 2014, the European General Court (“GC”) dismissed the appeal of Intel Corporation (“Intel”) against an infringement finding by the European Commission (“EC”), which had levied a penalty of EUR 1.06bn (SGD 1.6bn), against the chipmaking giant. The GC’s decision is seen as a landmark (albeit controversial) case with regard to abuse of dominance, and more particularly with regard to how rebate and discount structures offered by dominant companies ought to be assessed.

 

The decision of the EC was originally handed down in 2009, and took issue with two practices Intel engaged in.

 

First, the EC alleged that Intel gave wholly or partially hidden rebates to certain computer manufacturers (such as Dell and Lenovo) on the condition that they bought all, or almost all, of a particular type of computer processing unit (“CPU”) from Intel. Intel also allegedly made direct payments to one personal computer manufacturer, on condition that it only stocked this particular type of CPU.

 

Secondly, the EC alleged that Intel made direct payments to other computer manufacturers to stop or delay the launch of specific products containing Advanced Micro Devices’ (“AMD”) rival CPU, and to limit the sales channels available to these products.In handing down its judgment, the GC made a distinction between three types of rebates:

 

(a) quantity rebates ie those which are linked to the volume of purchases made from the dominant firm (and based on efficiencies);

 

(b) rebates conditional on the customer purchasing “all or most” of its purchases of the relevant product from the dominant firm; and

 

(c) “other” rebate systems where the rebate is not directly linked to a condition of exclusive or near-exclusive supply.

 

The GC determined that the first type of rebates were generally not problematic, the second type were “by their very nature” problematic (with no further effects-based analysis required), and the third type needed to be assessed on a case-bycase basis. In relation to Intel’s rebates, these were classified as “type 2”, and thus found to be anti-competitive.

 

The GC also stated in relation to the case that “exclusivity rebates granted by an undertaking in a dominant position are, by their very nature, capable of restricting competition and foreclosing competitors from the market. It is thus not necessary to show that they are capable of restricting competition on a case by case basis in the light of the facts of the individual case”.

 

The decision of the GC has been seen by some commentators as a backward step for the implementation of an “effects-based” approach to competition law analysis. An effects-based approach is one whereby the actual effects of conduct on the market in question should be brought to the fore, rather than simply condemning a practice based simply on the type of conduct in question (which is known as a “form-based” assessment).

 

The case has now been appealed to the European Court of Justice, and as such will likely not be concluded for many years. The appeal also challenges a number of procedural elements regarding the treatment of evidence, as well as substantive competition law questions.

 

In Singapore:

 

The Competition Commission of Singapore’s (“CCS”) Guidelines on the section 47 Prohibition (“Guidelines”) outline that, in certain circumstances, discounts or rebates could give rise to competition issues. In particular, the Guidelines state that CCS will consider a range of factors in assessing such discounts, including whether the discount simply reflects competition to secure orders from valued buyers. The Guidelines continue to state that a key question is whether the discount scheme will have an exclusionary effect on competition, which might arise where the discount arrangement amounts to a “fidelity discount” or where it involves the tying of other products. The Guidelines also state that it is necessary for the dominant undertaking to show that its conduct is proportionate to the benefits produced.

 

Ultimately, there have been no cases in Singapore to date relating to discount structures being abusive, and accordingly there is no further guidance on the precise parameters of permissible rebate arrangements


Drew & Napier

  

For further information, please contact:

 

Cavinder Bull, Director, Drew & Napier

cavinder.bull@drewnapier.com

 

Chong Kin Lim, Director, Drew & Napier

chongkin.lim@drewnapier.com

 

Scott Clements, Drew & Napier

scott.clements@drewnapier.com

 

Drew & Napier Competition & Antitrust Practice Profile in Singapore

 

Homegrown Competition & Antitrust Law Firms in Singapore

 

 

Comments are closed.