The European Commission has fined Qualcomm EUR 997 million for abusing its dominant position in the market for LTE smartphone chips. The company was found to have made special payments to Apple in order to ensure only Qualcomm chips were used in the iPhone and iPad. Qualcomm said it will appeal the decision.
Qualcomm signed an agreement in 2011 with Apple, committing to make significant payments to Apple on condition that the company would exclusively use Qualcomm chipsets in its iPhone and iPad devices. According to EU competition commissioner Margrethe Vestager, the payments were in the "billions". In 2013, the agreement was extended to the end of 2016.
The result was that other chipmakers were unable to secure Apple as a customer, "no matter how good their products were", the EC said. They were also denied business opportunities with other customers that could have followed from securing Apple as a customer.
Qualcomm to appeal
Qualcomm said it "strongly disagrees" with the EC's decision and will "immediately appeal" it to the General Court of the European Union. General counsel Don Rosenberg said in a statement that the company was "confident this agreement did not violate EU competition rules or adversely affect market competition or European consumers".
The fine, equal to almost 5 percent of Qualcomm's revenues in 2017, is based on the duration of the infraction, at least five years from 2011 to 2016, as well as Qualcomm's high market share, of over 90 percent for the majority of the period. The high barriers to entry in the market and Qualcomm's very dominant position required the EU to look closely at the competitive situation, Vestager said. Apple over the same period averaged around one-third of LTE chips consumed in the market.
Verstager said at a press conference that the Commission obtained internal documents from Apple that showed the company was "seriously considering" switching to Intel as a chip supplier at various points during the period 2011 to 2016. However, such a change would have cost the company a significant amount of money. The company's agreement with Qualcomm made clear that not only would the chipmaker cease the payments to Apple if the company commercially launched a device with a chipset supplied by a rival, Apple would have had to return to Qualcomm a large part of the payments it had received in the past.
The European Commission started the competition investigation against Qualcomm in July 2015. In addition to the agreement with Apple, it was also looking at whether Qualcomm engaged in 'predatory pricing' by charging prices below costs with a view to forcing its competition out of the market. Vestager said that investigation was still open and there was no set date for completion.
Apple responds
Since then Apple started sourcing some chipsets from Intel, Vestager said. Furthermore, in early 2017, Apple started a series of lawsuits against Qualcomm, claiming USD 1 billion in fees withheld by the chipmaker. Apple also wants back some of the billions of dollars it claims it was overcharged in Qualcomm’s "illegal scheme" to control the market for mobile phone chips, according to the suit. This is already the subject of a separate investigation by the FTC in the US. The decision by the EC may strengthen Apple's legal case against Qualcomm.
Qualcomm has called Apple's claims "baseless", while accusing the company of supporting the "regulatory attacks on Qualcomm’s business" in various places around the world, such as South Korea and the US. Qualcomm also filed a counter-suit against Apple at the International Trade Commission in the US, calling for an import ban on the iPhone for alleged infringement of Qualcomm patents.
