EU Fines Qualcomm $1.2 Billion For Using Dominant Position To Secure LTE iPhone Chip Orders

BY Rajesh Pandey

Published 24 Jan 2018

The European Commission has fined Qualcomm €997 million ($1.2 billion) for using its dominant position in the industry to thwart competition through unfair business practices. In its ruling, the EU body says that Qualcomm prevented other LTE modem suppliers to offer their baseband to a “key customer” by making significant payments to it.

The “key customer” here refers to Apple. The agreement between Apple and Qualcomm was signed in 2011 which entitled the former to a significant payment if it solely used Qualcomm’s baseband chips in its iPhone and iPad devices. The agreement was further extended for a period of three years until the end of 2016 in 2013. The agreement prevented Apple from switching to another supplier and if it did, it would have to return Qualcomm a large part of the money it had received in the past.

Commissioner Margrethe Vestager, in charge of competition policy, said: “Qualcomm illegally shut out rivals from the market for LTE baseband chipsets for over five years, thereby cementing its market dominance. Qualcomm paid billions of US Dollars to a key customer, Apple, so that it would not buy from rivals. These payments were not just reductions in price – they were made on the condition that Apple would exclusively use Qualcomm’s baseband chipsets in all its iPhones and iPads.

This meant that no rival could effectively challenge Qualcomm in this market, no matter how good their products were. Qualcomm’s behaviour denied consumers and other companies more choice and innovation – and this in a sector with a huge demand and potential for innovative technologies. This is illegal under EU antitrust rules and why we have taken today’s decision.”

Internal documents suggest that Apple wanted to switch to Intel as an LTE modem supplier but decided against it and waited for the agreement to expire. It was only in September 2016 when the agreement was about to expire and the cost of transfer was limited that Apple started making use of baseband from Intel in its devices.

The EU Commission finds Qualcomm guilty of using its dominant market position to create an unfair business condition for rivals in the market. The large sum of money it paid to Apple also ensured that the company did not switch to another supplier as it would lose out on the incentives offered by Qualcomm. Thus, the EU Commission has fined Qualcomm €997,439,000 based on the total duration of the infringement of five years, six months and 23 days, the gravity of the infringement, and how the move benefitted Qualcomm.

EU’s ruling did not disclose how much money Qualcomm paid to Apple to keep using its LTE modem exclusively for over five years. Qualcomm has the option of appealing against the decision to reduce the total fine amount but whether it succeeds in that move or not is something that only time will tell.

Qualcomm is already embroiled in a legal dispute with Apple in which the Cupertino company argues that the royalties charged by the baseband maker are unfair.

[Via EU]