November 21, 2017

November 21, 2017

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November 20, 2017

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Takeaways from the Intel Judgment on the Legality of Exclusivity Rebates in the EU

According to the longstanding case law of the Court of Justice of the European Union (the “Court”), rebates which are conditional upon a purchaser buying all or most of its requirements from a dominant supplier (so called “exclusivity” or “loyalty” rebates) have been presumed to be abusive on the basis that they are by their very nature anticompetitive. The Intel judgment of 6 September 2017 marks a shift by the Court from this per se approach: for the first time, the Court suggests the need for an assessment of their anticompetitive effects on a case by case basis.

Caution in granting exclusivity rebates is still required as the Intel judgment has not eliminated the traditional presumption of illegality, but rather the Court has confirmed the possibility of rebutting it and clarified the analytical framework for doing so as follows:

  • dominant companies may submit evidence that their exclusivity rebates are not capable of restricting competition and, in particular, of producing foreclosure effects

  • if such evidence is produced, the antitrust authorities in the EU will examine the following circumstances:

  • the extent of the dominance in the relevant market;

  • the market coverage of the rebates;

  • the conditions and arrangements for granting these rebates;

  • their duration and amount; and

  • whether the dominant company has a strategy to exclude equally efficient competitors.

In practice, antitrust authorities will be expected to conduct a thorough economic analysis of the rebates, using the “as efficient competitor test” to establish whether competitors who are as efficient as the dominant company could profitably match the dominant company’s rebates.

Dominant companies can take some comfort that exclusivity rebates will no longer be condemned as inherently anticompetitive. In practice though, the risk assessment related to such rebates and in particular the risk of fines has not changed dramatically with this judgment. It should be viewed primarily as a welcome step in the right direction, calling for a more nuanced analysis of exclusivity rebates in the EU.

Copyright © 2017, Sheppard Mullin Richter & Hampton LLP.

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About this Author

Isabelle M. Rahman, Antitrust and Competition Attorney, Sheppard Mullin, Brussels Law Firm
Partner

Isabelle Rahman is a partner in the Antitrust and Competition Practice Group in the firm’s Brussels office.

Ms. Rahman has substantial experience in the application of the EU competition rules and represents clients active in  the airline, chemical, consumer products, food, life sciences and media industries, among others.

Ms. Rahman serves international clients in Brussels, providing strategic advice regarding merger control, cartel and abuse of dominance investigations, representing clients throughout the EU...

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