Intel's €1bn EU antitrust appeal: What the heck is the AEC test?

And what does this mean for competition case law?

Analysis The European Court of Justice's ping-ponging of Intel's billion-euro EU antitrust suit appeal might mark an evolution of rebate-based competition case law, legal eagles have said.

The chipmaker's long-running battle to overturn the $1.06bn fine it received from the ECJ in 2009 - following allegations from rival AMD that it used funds to coerce PC builders into favouring Intel inside - took a new twist yesterday as the case was batted down to a lower court for additional scrutiny.

The Register notes that the fine itself was not kicked out, but a decision made by the lower court is being called into question.

John Schmidt, a competition lawyer at Shepherd & Wedderburn, says all that was typically needed to prove anti-competitive behaviour was to link discounts to exclusivity, but this approach brushed aside some of the tricky details of economic markets.

When it made a competition case against Intel, the European Commission also offered what it calls an "as-efficient-competitor" (AEC) test: an analysis that determines if a dominant company (Intel) forced out competitors (AMD) that were as "efficient" as it was, which would be more rigorous evidence of anti-competitive behaviour.

That's because in a normal market, there are always winners and losers, Schmidt says. So if a dominant company knocks out a competitor that is less efficient, that's not really anti-competitive behaviour. But if it pushes out one that is as efficient or more efficient, that's a problem.

By applying its test, whatever its merits, the Commission found that Intel had forced out what it deemed to be an equally efficient competitor after offered rebates and payments in exchange for exclusivity.

In its appeal, Intel had disputed the application and findings of the AEC test. But when the General Court denied Intel's appeal of the EU fine in 2014, it (as was the de facto standard at the time) chose to ignore the application of the AEC test – and by extension Intel's complaints – altogether in its decision-making process.

So Intel took the case to the top court, the European Court of Justice. In its ruling, the court decided this case was such that the AEC test should in fact be properly evaluated by the General Court, and deferred the case back.

In a mild smackdown of the lower court, the Luxembourg court stated in the judgment, the "General Court erred in law [as regards the relevance of the AEC test] by failing to regard the analysis carried out by the Commission in the decision at issue as relevant and as forming part of the review that the General Court must perform in order to comply with the European Convention for the Protection of Human Rights and Fundamental Freedoms..."

It's not really a winning or losing decision, it just indicates that there's more analysis to do, Schmidt says. He points out that the Commission often wins its cases and it's possible the AEC test it did was fine.

Intel's was a very specific situation, and so it is not clear how this latest decision could be transferred to other domination cases - perhaps only those involving rebates, the competition lawyer tells us.

However, it does seem to suggest that the burden of proof in these kinds of litigations is widening, he adds.

That could make it more difficult for small dominant businesses to engage in competition suits, since they couldn't rely on presumptions and would need more proof.

Ioannis Lianos, a competition law professor at University College London, tells us the reality of the Intel case's effects on future proceedings is not clear since the wording in the ECJ ruling is "ambiguous".

An equally plausible interpretation of the decision is that rebuttals can exist if, and only if, the Commission relies on the AEC test when determining anti-competitive behaviour, Lianos adds.

He says we'll need to wait until the General Court makes it decision or there are future cases to learn more.

A spokeswoman for the Commission on competition did not respond to a request for comment about Intel's criticisms of the AEC test, but wrote in a statement that the Commission "will study the judgment carefully". ®

Other stories you might like

  • New York City rips out last city-owned public payphones
    Y'know, those large cellphones fixed in place that you share with everyone and have to put coins in. Y'know, those metal disks representing...

    New York City this week ripped out its last municipally-owned payphones from Times Square to make room for Wi-Fi kiosks from city infrastructure project LinkNYC.

    "NYC's last free-standing payphones were removed today; they'll be replaced with a Link, boosting accessibility and connectivity across the city," LinkNYC said via Twitter.

    Manhattan Borough President Mark Levine said, "Truly the end of an era but also, hopefully, the start of a new one with more equity in technology access!"

    Continue reading
  • Cheers ransomware hits VMware ESXi systems
    Now we can say extortionware has jumped the shark

    Another ransomware strain is targeting VMware ESXi servers, which have been the focus of extortionists and other miscreants in recent months.

    ESXi, a bare-metal hypervisor used by a broad range of organizations throughout the world, has become the target of such ransomware families as LockBit, Hive, and RansomEXX. The ubiquitous use of the technology, and the size of some companies that use it has made it an efficient way for crooks to infect large numbers of virtualized systems and connected devices and equipment, according to researchers with Trend Micro.

    "ESXi is widely used in enterprise settings for server virtualization," Trend Micro noted in a write-up this week. "It is therefore a popular target for ransomware attacks … Compromising ESXi servers has been a scheme used by some notorious cybercriminal groups because it is a means to swiftly spread the ransomware to many devices."

    Continue reading
  • Twitter founder Dorsey beats hasty retweet from the board
    We'll see you around the Block

    Twitter has officially entered the post-Dorsey age: its founder and two-time CEO's board term expired Wednesday, marking the first time the social media company hasn't had him around in some capacity.

    Jack Dorsey announced his resignation as Twitter chief exec in November 2021, and passed the baton to Parag Agrawal while remaining on the board. Now that board term has ended, and Dorsey has stepped down as expected. Agrawal has taken Dorsey's board seat; Salesforce co-CEO Bret Taylor has assumed the role of Twitter's board chair. 

    In his resignation announcement, Dorsey – who co-founded and is CEO of Block (formerly Square) – said having founders leading the companies they created can be severely limiting for an organization and can serve as a single point of failure. "I believe it's critical a company can stand on its own, free of its founder's influence or direction," Dorsey said. He didn't respond to a request for further comment today. 

    Continue reading
  • Snowflake stock drops as some top customers cut usage
    You might say its valuation is melting away

    IPO darling Snowflake's share price took a beating in an already bearish market for tech stocks after filing weaker than expected financial guidance amid a slowdown in orders from some of its largest customers.

    For its first quarter of fiscal 2023, ended April 30, Snowflake's revenue grew 85 percent year-on-year to $422.4 million. The company made an operating loss of $188.8 million, albeit down from $205.6 million a year ago.

    Although surpassing revenue expectations, the cloud-based data warehousing business saw its valuation tumble 16 percent in extended trading on Wednesday. Its stock price dived from $133 apiece to $117 in after-hours trading, and today is cruising back at $127. That stumble arrived amid a general tech stock sell-off some observers said was overdue.

    Continue reading
  • Amazon investors nuke proposed ethics overhaul and say yes to $212m CEO pay
    Workplace safety, labor organizing, sustainability and, um, wage 'fairness' all struck down in vote

    Amazon CEO Andy Jassy's first shareholder meeting was a rousing success for Amazon leadership and Jassy's bank account. But for activist investors intent on making Amazon more open and transparent, it was nothing short of a disaster.

    While actual voting results haven't been released yet, Amazon general counsel David Zapolsky told Reuters that stock owners voted down fifteen shareholder resolutions addressing topics including workplace safety, labor organizing, sustainability, and pay fairness. Amazon's board recommended voting no on all of the proposals.

    Jassy and the board scored additional victories in the form of shareholder approval for board appointments, executive compensation and a 20-for-1 stock split. Jassy's executive compensation package, which is tied to Amazon stock price and mostly delivered as stock awards over a multi-year period, was $212 million in 2021. 

    Continue reading
  • Confirmed: Broadcom, VMware agree to $61b merger
    Unless anyone out there can make a better offer. Oh, Elon?

    Broadcom has confirmed it intends to acquire VMware in a deal that looks set to be worth $61 billion, if it goes ahead: the agreement provides for a “go-shop” provision under which the virtualization giant may solicit alternative offers.

    Rumors of the proposed merger emerged earlier this week, amid much speculation, but neither of the companies was prepared to comment on the deal before today, when it was disclosed that the boards of directors of both organizations have unanimously approved the agreement.

    Michael Dell and Silver Lake investors, which own just over half of the outstanding shares in VMware between both, have apparently signed support agreements to vote in favor of the transaction, so long as the VMware board continues to recommend the proposed transaction with chip designer Broadcom.

    Continue reading

Biting the hand that feeds IT © 1998–2022