The EU said the deal between Qualcomm and Apple illegally shut out competition © PA Images
The EU said the deal between Qualcomm and Apple illegally shut out competition © PA Images

EU fines Qualcomm €997m over Apple deal

posted by Su-San Sit
26 January 2018

European Union (EU) antitrust regulators have fined US chipmaker Qualcomm €997m (£873m) for paying Apple to use its chips exclusively in its smartphones and tablets.

Margrethe Vestager, European competition commissioner, ruled that Qualcomm had taken advantage of its dominant position and cemented it when it agreed to pay Apple to use its chips exclusively from 2011-16.

“Qualcomm illegally shut out rivals from the market for LTE baseband chipsets for over five years, thereby cementing its market dominance,” she said.

“Qualcomm paid billions of US dollars to key customer Apple so 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.”

Vestager said the agreement meant no challenger could take on Qualcomm, hurting innovation in the chip sector, and it also meant that Apple had considered switching to major competitor Intel but decided not to, in part because of its exclusivity agreement.

Responding to the fine, Don Rosenberg, executive vice president and general counsel of Qualcomm, said the company would appeal the ruling.

“We are confident this agreement did not violate EU competition rules or adversely affect market competition or European consumers,” he said. 

“We have a strong case for judicial review and we will immediately commence that process.”

The fine represents 4.9% of Qualcomm’s turnover in 2017, according to the EU. 

Vestager said there would be no repercussions for Apple in the case, citing internal documents showing Apple considered switching some of its work to Intel but could not do so financially until the end of the agreement.

She added that European regulators would also continue a separate investigation into preliminary findings that Qualcomm sold its chips at below cost price between 2009-11 to force a competitor out of the market. 

Meanwhile, Apple and Qualcomm are locked in a wide-ranging legal battle over Qualcomm’s business practices, which started last year when Apple sued Qualcomm $1bn for not giving fair licencing terms for its technology.

Qualcomm responded by suing Apple for patent infringement and sought a ban on iPhone sales. The company said that no modern handset, including the iPhone, would have been possible without its cellular technologies.

In a separate ongoing investigation the US Federal Trade Commission accuses Qualcomm of forcing Apple to use its chips exclusively in exchange for lower licencing fees, excluding competitors and harming competition. 

In October the company was fined $778m (£595m) by Taiwanese regulators.

At the time, the Taiwan Fair Trade Commission said Qualcomm had a monopoly over the chip market for several modern technologies, which provide wireless data connectivity data for mobile phones, and it refused to licence its technology to other industry players. 

Qualcomm has also come under scrutiny in China, where it paid nearly $1bn in 2015 to end a 14-month antitrust investigation. The South Korean Fair Trade Commission fined the company $850m for maintaining an “unfair business model” and creating a monopoly with its practices.

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