EU fines Qualcomm $1.2B for Anti-competitive Practices
24 January, 2018
Commissioner Margrethe Vestager: "Qualcomm paid billions of US Dollars to Apple, a key customer, so that it would not buy from rivals." When the agreement was about to expire, Apple started to source Intel
The European Commission has fined Qualcomm €997m for abusing its market dominance in LTE baseband chipsets. The EU announced that “Qualcomm prevented rivals from competing in the market by making significant payments to a key customer on condition it would not buy from rivals. This is illegal under EU antitrust rules.” The Commission has also ordered Qualcomm to not engage in such practices in the future.
Commissioner Margrethe Vestager (photo above), 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 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. This is illegal under EU antitrust rules.”
How to block Intel’s LTE chipsets
Baseband chipsets enable smartphones and tablets to connect to cellular networks and are used both for voice and data transmission. LTE baseband chipsets comply with the 4G Long-Term Evolution (LTE) standard. Although Qualcomm is the world’s largest supplier of LTE baseband chipsets, there are other chip manufacturers active in this market, including Intel. In 2011, Qualcomm signed an agreement 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. In 2013, the term of the agreement was extended to the end of 2016.
The agreement made clear that Qualcomm would cease these payments, if Apple commercially launched a device with a chipset supplied by a rival. Furthermore, Apple would have had to return to Qualcomm a large part of the payments it had received in the past, if it decided to switch suppliers. The EU wrote in the announcement: “Internal documents show that Apple gave serious consideration to switching part of its baseband chipset requirements to Intel. Qualcomm’s exclusivity condition was a material factor why Apple decided against doing so, until the agreement came to an end. Then, in September 2016, when the agreement was about to expire and the cost of switching under its terms was limited, Apple started to source part of its baseband chipset requirements from Intel.
The EU investigation concludes that Qualcomm held a dominant position in the global market for LTE baseband chipsets between at least 2011 and 2016, amounting to more than 90% for the majority of the period. “Based on a variety of qualitative and quantitative evidence, the Commission found that both consumers and competition have suffered as a result of Qualcomm’s conduct. The fine of € 997,439,000 (approximately $1.2 billion) represents 4.9% of Qualcomm’s turnover in 2017. “It takes account of the duration and gravity of the infringement, and is aimed at deterring market players from engaging in such anti-competitive practices in the future.”