Competition Commission of India slaps Rs 27 crore fine on Intel over ‘abusive’ warranty policy that lasted 8 years

Section 4(2)(a)(i) of the Competition Act, 2002 pertains to the abuse of a dominant position by an enterprise or group.

Specifically, it prohibits the direct or indirect imposition of unfair or discriminatory conditions in the purchase or sale of goods or services.

Background

• The case originated from the complaint filed in 2019 by Matrix Info Systems Private Limited, a Delhi-based parallel importer of Intel microprocessors.
• Matrix alleged that the 2016 policy forced Indian consumers and resellers to buy only from Intel’s authorised distributors at higher prices, while cheaper parallel imports lost warranty cover in India.
• It claimed the policy of Intel protected authorised distributors’ market share and caused an appreciable adverse effect on competition by limiting choice and foreclosing competition.
• The commission, prima facie found Intel dominant and directed an investigation by the CCI in August 2019.
• Intel challenged the order before the Karnataka High Court, which stayed proceedings in 2019 but dismissed the writ in 2022.
• The CCI submitted its report in January 2024, confirming dominance and abuse.
• Intel voluntarily withdrew the India-specific policy from April 1, 2024, citing business reasons.

Submissions

• Advocates Khyati Dhupar, Yashwardhan Singh, and Swarendu Chatterjee, appearing for the (informant) complainant, argued that Intel’s policy was discriminatory and unfair under Section 4(2)(a)(i) of the Act.
• They contended that by restricting warranties to purchases from authorised Indian distributors, Intel imposed arbitrary conditions that disadvantaged parallel importers and independent resellers.
• This not only limited consumer choice but also created an appreciable adverse effect on competition by allowing authorised distributors to charge premium prices without fear of cheaper imports.
• Opposing the submissions, advocates Samar Bansal, Karan Chandhiok, Tarushi Guliani, and Evangelina Almirantearena (authorised representative), appearing for Intel Corporation, defended the policy as a legitimate business decision without anti-competitive intent.
• They argued that the warranty change was aimed at streamlining service and addressing issues like counterfeit products, not to restrict competition.
• Intel pointed out that it had voluntarily reverted to a worldwide warranty policy effective April 1, 2024, rendering the case moot and saving resources for all parties.
• They contested Competition Commission of India’s findings, claiming no evidence of market foreclosure or harm to consumers, and highlighted that parallel imports continued despite the policy.

Findings

• The India-specific warranty/warranty service of Intel Corp is unfair and discriminatory in terms of Section 4(2)(a)(i) of the Act, which has deprived Indian consumers from availing a rightful warranty service in India on a genuine Intel BMP since 2016 till Intel Corp withdrew the policy in 2024.
• The 2016 India-Specific Warranty Policy of Intel was abusive in nature.
• The commission also takes into account that the Indian market has been one of the top markets for Intel microprocessors.
• Intel recorded high sales in India, and the country has remained among the top 10 in terms of sales value and volume from 2016 to 2021.
• Intel Corporation has a worldwide warranty policy and a separate warranty/warranty service policies for India, Australia and China.
• Warranty policies in Australia and China do not have similar restrictive conditions as in India.
• India Specific Warranty Policy was discriminatory in nature when compared to its warranty policy in China, Australia and rest of the world, in contravention of Section 4(2)(a)(i) of the Act.
• It affected the sales of parallel importers whose sales remained constant or declined despite growth in the industry, leading to denial of market access to others.
• The South Asia region has largely similar conditions of competition.
• Due to discriminatory policy, the customers in the South Asian region, except India, were able to enjoy the world-wide warranty service.
• Indian consumers were discriminated against in comparison to other consumers in the rest of the world or even in the South Asian region.
• A warranty is one of the relevant factors in purchase of a boxed microprocessor as it protects against manufacturing defects, minimises costs associated with premature failure and also offers peace of mind to the consumer.

Final directions

• After considering mitigating factors, voluntary withdrawal of the policy, full cooperation, and dynamic tech market, it reduced the amount and imposed a total penalty of Rs 27.38 crore.
• Intel has been directed to deposit the penalty within 60 days and widely publicise the withdrawal of the India-specific policy.
• It must also submit a compliance report within 60 days, directed the Competition Commission of India.