Federal Court Denies Class Certification In Intel Antitrust Litigation

By David Golden

Plaintiffs in the long-running In re Intel Corporation Microprocessor Antitrust Litigation class action have suffered a major setback with last week’s denial of class certification by the U.S. District Court for the District of Delaware.

The lawsuit, filed in 2005, alleges that Intel illegally excluded its major rival, Advanced Micro Devices (commonly referred to as “AMD”), from the U.S. market for x86 computer microprocessors[1] by paying computer manufacturers “loyalty payments” and “rebates” to use only Intel chips. The proposed class is compromised of indirect purchasers that bought computers that contained Intel microprocessors. The plaintiffs contend Intel’s payments to computer manufacturers reduced competition for chips, and ultimately raised the prices consumers paid for computers.

To achieve certification, the plaintiffs needed to show that common proof of damages predominated over individualized circumstances, such as evidence that the computer manufacturers had no discretion in how they used the Intel payments. The “predominance requirement” helps to ensure that plaintiffs’ claims can be proved by uniform evidence. Most courts view the requirement as a prerequisite to the certification of a damages class.

But the court found the opposite was true. The evidence showed that Dell used some of its Intel payments as discounts against the costs of microprocessors and passed those savings along to the ultimate consumer. Hewlett-Packard, Gateway, IBM, and others had similar discretion and used the Intel payments in various ways, sometimes passing the savings along to customers and sometimes not. Accordingly, the court found predominance did not exist and that “individualized inquiry is necessary to determine which proposed members were negatively impacted by Intel’s challenged conduct, which proposed class members were not impacted at all and which proposed class members may have actually benefited.”

Even though plaintiffs lost their class certification battle, Intel’s payment scheme has been condemned around the world as anticompetitive. In March 2005, the Japan Fair Trade Commission charged Intel with violations of Japanese competition laws, and Intel agreed to a consent decree shortly thereafter. In June 2005, AMD filed an antitrust suit against Intel in Delaware federal court, which settled in November 2009. The European Commission sent a statement of objections to Intel in July 2007 and 2008, and eventually fined the company more than 1 billion Euros. In June 2008, the Korean Fair Trade Commission ruled that Intel violated Korean competition laws. Finally, in December 2009, the U.S. Federal Trade Commission filed an administrative complaint against Intel. The FTC case settled in July 2010.

The court’s decision on class certification was a long time coming. The motion to certify class was originally filed on May 16, 2008. A special master issued his recommendation to deny class certification on July 28, 2010, and plaintiffs filed objections later that year. After extensive class certification proceedings, the court announced on September 28, 2012, that it required additional briefing and an evidentiary hearing to make a determination. The court’s July 31, 2014, ruling adopted the special master’s 2010 recommendation regarding class certification, but the court sealed its memorandum opinion.

This case illustrates the challenges associated with bringing indirect purchaser class actions and the complicated issues of proof that arise, sometimes very late in the litigation process. Before expending considerable resources and time, parties considering bringing such actions should consult outside counsel with extensive experience in antitrust class actions for expert advice.

– Edited by Gary J. Malone

[1] Microprocessors are the “brains” of computers, and are typically designed and built according to specific architecture standards. The x86 family of processors, the type of microprocessors at issue in the litigation, is used by computers running the Microsoft Windows operating system, the Apple OSX operating system, and some versions of the open-source Linux operating system.