CCI Orders Investigation for Abuse of Dominance Allegations against Intel Corporation

On November 9, 2018, CCI dismissed the information filed by Velankani Electronics Private Limited (‘VEPL’) against Intel Corporation (‘Intel’). The information alleged contravention of the provisions of Section 4 of the Act.[1] Intel is in the business of designing, manufacturing and distribution of a wide range of IT components, peripherals, computer systems, etc.  Intel is also in the business of designing, manufacturing and distribution of electronic devices related to communications and computing such as processors, chipsets, mother-board/ server-board, integrated circuits, network interface controllers, flash memory, etc. VEPL manufactures ‘servers’, a type of computer designed to process requests and deliver data to another computer over the internet or a local network. Servers have various sub-assemblies which are not manufactured by VEPL but assembled after purchase from the market. VEPL had entered into a Manufacturing Enablement Agreement with Intel to enable itself to manufacture server-boards based on Intel’s designs, in exchange for a license fee.

VEPL submitted that Intel has a market share of more than 80% and most consumers of servers treat and accept Intel’s processors as the industry standard, preferring it over other micro-processor manufacturers. Therefore, VEPL was completely dependent on Intel for procuring processors for its servers and in its information has alleged refusal on Intel’s part in providing the reference design files required to manufacture server-boards. VEPL has also submitted that these reference design files are provided by Intel to VEPL’s competitors in the server market like Dell, HPE, etc. (‘ODMs/OEMs’). The reason given by Intel for not providing the required reference designs to VEPL is that VEPL does not have ‘sufficient technical and sales scope and expertise’.

CCI determined the relevant market to be the market for ‘processors for servers in India’. CCI concluded that Intel is in a dominant position in the relevant market having more than 90% share globally and at least 80% market share in India. CCI also relied on its previous decision in ESYS Information Technologies Private Limited v Intel Corporation[2] where Intel was considered dominant in the market for micro-processors for servers in India. According to CCI, Intel:

(i)      was unable to provide a reasonable explanation for not allowing VEPL access to reference design files in order to develop processors when it has provided them to other ODMs/OEMs (discriminatory treatment);

(ii)     had denied market access to VEPL in contravention of Section 4 (2)(c) of the Act;

(iii)   had limited and restricted the production of servers and the market and has also limited the technical/ scientific development relating to servers in the market, in violation of Section 4 (2)(b) of the Act.

Consequently, without going into Intel’s intent for alleged contravention of the provisions of the Act, CCI directed the Director General to ascertain whether Intel has abused its dominant position in the relevant market.

[1] Case No. 16 of 2018.
[2] Case No. 48 of 2011.

Published In:Inter Alia Special Edition Competition Law November 2018 [ English
Date: November 30, 2018