EU will analyze ‘efficiency’ claims of loyalty rebates, Madero says

29 March 2017. By Lewis Crofts.

Exclusivity rebates should normally be presumed to be anticompetitive, but the European Commission will review claims from companies under investigation that their schemes produce "efficiency-enhancing" benefits, a senior EU enforcer said.

Cecilio Madero Villarejo, deputy director-general at the commission, told a conference* Wednesday in Washington, DC, that rebates designed to exclude competitors are abusive "unless justified by the dominant company."

"This means that the commission is not obliged to demonstrate the anticompetitive effects of such rebates, even though we generally do so," he said. "We are nevertheless obliged to assess any efficiency claims brought by the dominant company."

Madero, speaking in a personal capacity, made reference to ongoing litigation before the EU courts over a 1.06 billion-euro ($1.14 billion) fine on Intel for rebates used in the sales of computer chips. The company was found to have used rebates to induce the loyalty of computer-makers and exclude rival manufacturer AMD.

The commission won a first-instance ruling in 2014, in which judges said the rebates were presumptively illegal and officials didn't need to run an analysis of the effect of the conduct. Judges are expected to rule this year on an appeal of that ruling, clarifying what investigators have to do to fine a company for such schemes.

Madero said it was "inappropriate" to have a hard and fast rule that said rebates were inherently illegal.

But given the authority's limited resources, Madero said it "might be more productive to presume certain exclusivity-based rebates [are] anticompetitive, and only if the dominant company comes forward with efficiency arguments, carry out carefully an in-depth assessment."

In the Intel investigation, officials also studied the effects of the rebate scheme in addition to conducting a legal analysis, which concluded the rebates were anticompetitive.

The economic analysis — which studied how an equally competitive rival would have behaved — led to two further years of investigation in the Intel case, Madero said.

He said this "as-efficient competitor test" was "one useful tool" for conducting the analysis, but there were others.

*American Bar Association Antitrust Law 2017 Spring Meeting. Washington, DC. March 29-31, 2017.

	Eliot Gao