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

Intel warranty policy case: The Competition Commission of India (CCI) has imposed a penalty of Rs 27.38 crore on ‘Intel Corporation’ for abusing its dominant position by imposing an “India Specific Warranty Policy” on boxed microprocessors (BMPs) from April 25, 2016 to April 1, 2024.

The coram, comprising Ravneet Kaur (Chairperson), Anil Agrawal (Member), Sweta Kakkad (Member), and Deepak Anurag (Member), was hearing a complaint filed by Matrix Info Systems Private Limited against Intel and imposed the penalty.

“The opposite party (Intel Corporation) has abused its dominant position by imposing unfair and discriminatory India Specific Warranty Policy in respect of boxed microprocessors imported into India from its authorised distributors outside India in contravention of Sections 4(2)(a)(i), 4(2)(b)(i) and 4(2)(c) of the Act causing AAEC (Appreciable Adverse Effect on Competition) in the Indian market, preventing the Indian consumer from availing after sale warranty service on authentic Intel boxed microprocessors in India from April 25, 2016 to April 1, 2024,” said the commission February 12.

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.