Final report of the Hearing Officer in Case COMP/C-3/37.990 — Intel
Date: 2009-09-22
Institutions: European Commission
Subjects: competition law, computer equipment, limitation of legal proceedings, marketing, report, restriction on competition, spare part








C_2009227EN.01000701.xml










22.9.2009   


EN


Official Journal of the European Union


C 227/7





Final report of the Hearing Officer in Case COMP/C-3/37.990 — Intel (1)

2009/C 227/06
The Intel case has been one of the most complex cases thus far with regard to procedural issues. The adversarial setting of the case between the complainant Advanced Micro Devices (‘AMD’) and Intel Corporation (‘Intel’) extends far beyond the European theatre. It has led to multiple procedural challenges by all parties and information providers concerned. A variety of procedural issues, many explicitly mentioned in the draft Decision, touched upon core competences of the Hearing Officer, requiring her to present an assessment in this final report.
Following the departure of the former Hearing Officer, Mr. Serge Durande, on 31 December 2007, the responsible Hearing Officer changed in this case.
The draft Decision gives rise to the following observations:
I.   WRITTEN PROCEDURE

1.   Statement of Objections

The Statement of Objections (‘SO’) was adopted by the Commission on 25 July 2007. Intel was given 10 weeks, until 11 October 2007, to reply to the SO. The Hearing Officer granted Intel upon reasoned request an extension of the deadline until 4 January 2008, later extended to 7 January 2009, mainly in view of unresolved access to file issues at that point in time and the fact that undertaking a full analysis of the relevant average avoidable costs of Intel's business was a legitimate defence vis-à-vis the use of complex assessments in economic models in the SO concerning the rebates (2). The assessment made by the Hearing Officer was that, although showing in an economic assessment that the conditional rebates were capable of causing or likely to cause anticompetitive foreclosure was — according to the draft Decision — ‘not indispensable’ for finding an abuse in this case (3), the full exercise of the rights of defence had to be granted.
Intel replied to the SO in time.
2.   Supplementary Statement of Objections

The Supplementary Statement of Objection (‘SSO’) was adopted by the Commission on 17 July 2008. At the same time the Commission joined the relevant findings of Case COMP/C-3/39.493 to the procedure followed under Case COMP/C-3/37.990 and continued the procedure under Case COMP/C-3/37.990.
Intel was given eight weeks to submit its reply to the SSO. The Hearing Officer, by letter of 15 September 2008, granted Intel upon reasoned request an extension of the deadline until 17 October 2008, mainly in view of the complexity of the case now joined and the breadth of allegations dating back to 1997 and requiring additional investigations within Intel.
Intel did not reply to the SSO within the extended deadline. Instead, on 10 October 2008, Intel lodged with the Court of First Instance (CFI) an application seeking inter alia the annulment of the decision of the Hearing Officer of 15 September 2008 granting an extension of the time limit and further applied for interim measures (4).
By order of 27 January 2009, the President of the CFI rejected Intel's application for interim measures on the ground that Intel's main application was prima facie manifestly inadmissible. This rejection included the rejection of Intel's request for a further extension of the 17 October 2008 deadline to reply to the 17 July 2008 SSO.
3.   Letter of Facts

On 19 December 2008, the Commission sent Intel a letter drawing Intel’s attention to a certain number of specific items of evidence relating to the Commission’s existing objections which the Commission indicated it might use in a potential final Decision (Letter of facts, ‘LoF’). The Commission set Intel a deadline of 19 January 2009 to provide comments on these items. This deadline was extended by the Directorate General for Competition to 23 January 2009. The LoF did not materially alter the evidentiary basis on which the Commission's objections against Intel set out in the SO are based, nor the SSO. Intel requested an extension on the basis of an allegedly incomplete file (cf infra I.4. (d)) and its pending request for an oral hearing on certain documents (cf. infra II.2). By letter of 22 January 2009 the Hearing Officer rejected this request.
4.   Access to file

(a)   Preparation of access to file: The Non-disclosure agreements

The file in this case was extraordinarily voluminous. In preparation for access to file, various Original Equipment Manufacturers (‘OEMs’) concluded bilaterally Non-Disclosure Agreements (‘NDAs’) with Intel, which differ only on details. For specific cases, some NDAs call upon the Hearing Officer to decide in case of a disagreement between the parties. Separately, Intel partially waived vis-à-vis the Commission its right to access to file, in case the access it had received from the OEMs would limit its access rights under Commission Regulation (EC) No 773/2004 (5), while each OEM concerned waived its rights to the protection of business secrets and other confidential information with regard to the information exchanged bilaterally under the agreements with Intel. The Hearing Officer was involved in the setting up of these NDAs and supported their conclusion in this case.
(b)   The Dell-AMD Non-disclosure agreement

Prior to the Oral Hearing on the SO, AMD informed the Hearing Officer that it had concluded an NDA with Dell, according to which it received access to the quotes by Dell which were used in the SO. Contrary to the NDAs concluded with Intel, such an agreement, concluded by a party that as such has no rights of defence or rights to access to file, was purely bilateral and did not create either rights or obligations for the Commission. Therefore, and contrary to misrepresentations by Intel, the Hearing Officer continued to regard all Dell quotes in the SO which have been accepted as confidential vis-à-vis the complainant AMD to remain confidential vis-à-vis AMD for the purpose of the entire administrative procedure, including the Oral Hearing.
(c)   Completeness of access to the file

Despite the NDAs mentioned above (supra I.4.(a)) the complexity of the file and the manifold confidential information contained within triggered a multitude of requests by Intel for access to file. To grant Intel the most complete access to the file possible required a high number of personal inspections by the Hearing Officer of documents which Intel claimed it needed for an effective defence. Having considered the reasoning provided by Intel, several of these claims were granted.
Intel complained of lack of complete access to documents in relation to a meeting between the Commission and an OEM (6). Following a reasoned request by Intel the Hearing Officer investigated whether any written document on the subject of this meeting existed. A ‘Note to the file’ dated 29 August 2006 was revealed by the Directorate General and put on the file after the Hearing Officer so decided on 7 May 2008. Simultaneously, the Hearing Officer decided that this note was internal in character under Article 27(2) Regulation (EC) No 1/2003 and Article 15(2) Regulation (EC) No 773/2004. Whether or not objective minutes or a proper transcript should have been established of this meeting is in principle a matter of good administration and hence not an issue to be examined in a final report by the Hearing Officer.
The Hearing Officer considers that Intel was granted complete access to file.
(d)   Access to documents not in the file

As described in detail in the draft Decision (7), Intel asked the Commission by letter of 4 September 2008 to obtain from AMD and provide to Intel a list of 81 categories of documents relating to private litigation between Intel and AMD before the Federal District Court in Delaware in the United States of America, documents which according to Intel were likely to be exculpatory. Subsequently, on 25 September 2008, Intel requested the Commission that it ‘should, at a minimum, request that AMD provide all internal documents relevant to the allegations in both the SO and the SSO’. By letters of 17 and 29 September 2008 Intel complained to the Hearing Officer that ‘the file is manifestly incomplete’ and that its rights of defence were therefore compromised.
The Hearing Officer replied by letter of 7 October 2008, referring to her prior letters of 22 August 2008 and 15 September 2008 on this issue, that the question whether or not the file as such is complete is different from the question whether complete access to an allegedly incomplete file is given. Accordingly, arguments relating to a file which is allegedly incomplete cannot establish the point that access to the file as it stands at a certain point in time is not complete.
Further, despite the responsibility of the Hearing Officer under recital 3 of the Mandate to contribute to the objectivity, transparency and efficiency of a proceeding, neither the current mandate nor the jurisprudence empower the Hearing Officer to order any investigation with a view to complete an allegedly incomplete file. Therefore, whether or not the documents concerned as of themselves might be relevant or not for the rights of defence, it is beyond the scope of her mandate to decide on the question whether certain categories of documents in another jurisdiction, even of a purportedly potential exculpatory nature, are described in a sufficiently specific and substantiated manner and/or should be investigated into or not. Intel’s request had therefore to be considered ultra vires.
(e)   Non-confidential version of the SO and the SSO for the complainant AMD

It follows from Article 6(1) of Regulation (EC) No 773/2004 that the complainant has a right to receive a non-confidential version of the SO and the SSO. This right would be severely undermined and the norm would become devoid of purpose if the version finally received would not be understandable for the recipient.
In respect of information provided by third parties and which shall be disclosed not only to the addressee of a SO but to a complainant, it is crucial to distinguish between information that cannot be considered confidential and information for which confidentiality has been claimed and justified but which shall be disclosed in order to render a non-confidential version understandable. Business secrets are not to be disclosed and, in principle, confidentiality claims against the complainant, if justified, are absolute. However, if disclosure of the relevant information is strictly unavoidable in order to understand the core allegation in the SO, relates to information necessary to prove an infringement, and is strictly necessary to associate the complainant to the procedure so that he can make informed comments on it, such disclosure of confidential information is possible depending on a balanced and reasoned appreciation by the Hearing Officer.
Both for the SO and the SSO the Hearing Officer rejected Intel's claims for almost complete confidentiality and had to evaluate an extraordinarily high number of reasoned and detailed confidentiality requests both by Intel and by information providers. This was achieved without any recourse to a decision under Article 9 of the Mandate (initiating the so called ‘AKZO-procedure’ (8) either by Intel or other concerned undertakings.
In October 2008 Intel disclosed the complete confidential version of the SO to AMD in the US proceedings. Intel claims that this has been inadvertent. Intel informed the Commission of this fact on 17 March 2009.
(f)   Third parties

Three companies requested formal admission to the proceedings as interested third parties. In response to these requests, the Hearing Officer admitted Silicon Graphics Inc. (25 September 2007), International Business Machines (‘IBM’; 2 October 2007) and — just prior to the Oral Hearing — Hewlett Packard Company (‘HP’, 10 March 2008). Further, two consumer organisations were admitted as interested third parties after they provided sufficient justification as to their specific interest and status: the European Consumers Organisation Bureau Européen des Unions des Consommateurs (‘BEUC’; 22 February 2008) and Union Fédérale des Consommateurs — Que Choisir, a French consumer organisation (‘UFC’; 6 March 2008). All parties requested and received a non-confidential summary of the SO and of the SSO. None of the third parties provided written comments.
(g)   Requested additional SSO for objective justification

Intel took the position in its reply to the SO (9) that an additional statement of objections would be required for the issue of objective justification. However, an additional SSO was not necessary for the sole issue of objective justification. Whilst the absence of an objective justification is a negative condition for finding an abuse (10), the burden of proof lies with the party claiming objective justification. In so far as Intel proffered any purported objective justifications for the various types of conduct alleged in the SO, those have been dealt with by the Commission. The right to be heard has therefore been respected in this respect.
II.   THE ORAL PROCEDURE

1.   The Oral Hearing on the SO

The Hearing on the SO took place on 11 and 12 March 2008. Beyond Intel and AMD, three interested third parties attended the Hearing and gave presentations: HP, UFC Que Choisir and BEUC. In addition to the representatives of the Member States, a representative of the Federal Trade Commission participated as an observer, following the administrative arrangements of 1999. Further, and beyond the arrangements with the US, the Hearing Officer admitted the Attorney General of the State of New York (11) to participate in the Hearing as an observer. Intel explicitly agreed to their participation. Prior to admission, the Attorney General agreed to explicit undertakings as to confidentiality and use of information.
The Oral Hearing, despite various in-camera sessions due to legitimate confidentiality requests, was highly valuable in giving Intel the opportunity to present its views on the allegations, the underlying reasoning (12), and the economic assessment. In this respect it is important to note that during the Hearing the Commission made it clear to Intel and Intel understood that the economic assessment was not a condition for a finding of abuse.
On this basis it is not necessary for the Hearing Officer to express a position on the economic assessment and the conclusion that the Intel payments are capable of having or likely to have anticompetitive foreclosure effects (13).
2.   The requested Oral Hearing on the SSO and the LoF

Intel requested an oral hearing on (a) parts of the LoF and (b) the SSO.






(a)


Following the LoF Intel requested by letter of 20 January 2009 an oral hearing concerning certain AMD documents submitted to the Commission on 28 May 2008 (‘the AMD Delaware documents’). The Hearing Officer recalled on 22 January 2009 that there is no right for Intel to demand, nor any obligation for the Commission to provide for an oral hearing in order to respect Intel's rights of defence in relation to a Letter of Facts.
Moreover, an oral hearing could not be granted on the sole subject matter of the AMD Delaware documents because those were given as part of the access to file procedure following the issue of the SSO, on which Intel had been given an opportunity to reply and request an oral hearing already, and because the subject matter of an oral hearing is defined by the allegations in the SO and/or SSO and not by the party. An oral hearing dedicated exclusively to present views on selected documents could not be granted.










(b)


In its submission of 5 February 2009 and by letter of 10 February 2009 Intel requested an oral hearing on the SSO.
Decisions relating to oral hearings, including a decision granting or rejecting a request for an oral hearing submitted after the deadline to reply to a statement of objections, fall within the competence of the Hearing Officer under the mandate.




By letter of 17 February 2009, the Hearing Officer thus replied to Intel that a subjective right to have an oral hearing exists only until the end of the deadline to reply to the statement of objections. Failing to request an oral hearing within the deadline set did not automatically entail that a hearing can no longer take place in all cases. Article 10(2), read together with Article 12 of Regulation (EC) No 773/2004, does not necessarily preclude a party from requesting an oral hearing. Failing to meet that deadline implied that there is no longer a duty to grant such a hearing. The Hearing Officer is entitled and obliged to exercise her discretion once a belated and duly motivated request is submitted to her.
The deadline to reply to the SSO had not been extended. The Hearing Officer took note of the position of the Commission services as expressed in their letter to Intel of 2 February 2009 (14) according to which the proper conduct of the procedure did not necessitate the holding of an oral hearing. Equally, she took account of all arguments in favour of granting a hearing advanced by Intel, which mainly referred to its ‘unlimited’ right to be granted an oral hearing.
In exercising her discretion the Hearing Officer is under the obligation to take account inter alia of the need for effective application of the competition rules, an essential part of which is the obligation of the Commission to act within a reasonable time in adopting decisions. While time constraints inherent in the manner in which the competition procedure is organized cannot justify infringing the fundamental right to be heard, no such conflict arose in the present case. In this case, Intel was in no way prevented from preparing and submitting, in good time, its reply to the SSO on the basis of the information available to it, at least as a precaution, and that all the more so since the Hearing Officer had granted an extension of the deadline. Intel had been offered the time to request an oral hearing from the date the SSO has been served in July 2008 until the end of the — extended — deadline in October 2008. It would not have been impossible to grant a hearing even thereafter, if Intel had asked for it — which it did not. Nothing would have precluded the Hearing Officer from setting the hearing dates in a manner consistent with the ongoing request for interim measures and thus in full respect for the proceedings before the Court. So while Intel during the entire procedure until its filing of the appeal to the CFI had in general acted swiftly and within the deadlines set, making full use of its rights of defence, allowing Intel an oral hearing under the precise circumstances on 17 February 2009 would have severely jeopardized the timely progress of the procedure. Taking this and other reasons specific to the case into account, the request had to be rejected.
The Hearing Officer has not been addressed by Intel on the issue of the status of the written submissions of 5 February 2009.
III.   CONCLUSIONS

In the light of the above, I consider that the rights to be heard have been respected in the present case.
The draft Decision deals only with objections in respect of which Intel has been afforded the opportunity of making known its views.


Karen WILLIAMS





(1)  Pursuant to Articles 15 and 16 of Commission Decision (2001/462/EC, ECSC) of 23 May 2001 on the terms of reference of Hearing Officers in certain competition proceedings (OJ L 162, 19.6.2001, p. 21) hereafter ‘the mandate’.

(2)  Cf. paragraphs 1045 to 1156 of the draft Decision discussing this analysis, e.g. paragraph 1066 et seq. on the regression analysis applied by Intel.

(3)  As made explicit in the draft Decision paragraph 925, indicated in the SO paragraph 337 and mentioned in the SSO paragraph 260.

(4)  Cf. for details paragraphs 18 and 22 of the draft Decision and Order of the President of the Court of First Instance of 27 January 2009 in Case T-457/08 Intel Corp. v. Commission, nyr.

(5)  OJ L 123, 27.4.2004, p. 18.

(6)  For details cf. paragraph 39 et seq. of the draft Decision.

(7)  Para 71 et seq.

(8)  ECJ, Case 53/85, AKZO Chemie BV and AKZO Chemie UK Ltd v Commission, [1986] ECR, p. 1965.

(9)  Paragraph 823.

(10)  ECJ, Case C-95/04 P British Airways v Commission [2007] ECR I-2331, paragraph 69; Joined Cases C-468/06 to C-478/06 Sot. Lélos kai Sia and Others [2008] nyr, paragraph 39, and most recently Case 52/07, Kanal 5 Ltd. [2008] nyr, judgment of 11 December 2009, paragraph 47.

(11)  Cf. paragraph 35 of the draft decision.

(12)  Cf. e.g. paragraph 281 et seq of the draft decision.

(13)  Paragraphs 1002-1578 of the draft Decision.

(14)  See draft Decision paragraph 24.