European Union Fines Qualcomm $1.23 Billion for Anti-Competitive Apple Dealby Ryan Smith on January 24, 2018 7:00 AM EST
This morning the European Union’s European Commission became the latest regulatory body to fine Qualcomm over anti-competitive actions undertaken by the company. The investigation, which we’ve been expecting the results of for some time now, found Qualcomm guilty of abusing its dominant market position in LTE modems, with Qualcomm paying Apple to exclusively use its modems. As a result the Commission has levied the largest fine to date against Qualcomm, totaling over €997 million ($1.23 billion).
Qualcomm has been under scrutiny by regulators in one form or another for over a decade at this point. The company has previously been fined by China, South Korea, Taiwan, and there is still an ongoing investigation in the United States. While the precise infraction has varied some from fine to fine, in all cases regulators have cited Qualcomm for abusing its position in the cellular modem market in order to freeze out any competition. This has included their position to forcibly bundle unrelated patents and refusing to license out standards essential patents to customers who didn’t buy Qualcomm chips.
The European Commission’s case, by contrast, is perhaps the most interesting of the cases as it’s the most contemporary, dealing with Qualcomm’s actions from 2011 to 2016. The Commission’s case is solely focused on LTE shenanigans – other cases have tended to focus on CDMA or a mix of CDMA and LTE – with the regulatory body finding sufficient evidence of an anti-competitive Apple deal to charge the company under antitrust laws.
The Apple deal, which we first found out about in a US FTC investigation last year, had Qualcomm paying Apple royalty rebates in order to ensure Apple’s exclusive use of Qualcomm’s LTE modems. And while royalty rebates alone are not inherently illegal, the fact that Qualcomm was doing it in order to prevent other competitors from gaining a foothold in the LTE modem market – primarily Intel – is what makes it illegal. And while it’s just one of many handset vendors in the EU, Apple ships a large enough percentage of all handsets that landing an Apple deal can (and did) make or break an LTE modem vendor; so stopping Apple from looking outside Qualcomm would go a long way towards ensuring no other competition for Qualcomm cropped up.
Meanwhile, Apple’s cooperation with investigators has driven a large wedge between the two companies. Apple has been suing Qualcomm for another $1 billion in royalty rebates it says are still owed, and Qualcomm has been suing Apple for what they see as an unfounded global attack against the company. Apple has since begun multi-sourcing modems – starting with Intel’s XMM 7360 for the iPhone 7 in 2016 – so the European Commission’s case is more about punishing Qualcomm for past actions than it is about correcting any present market conditions.
Finally, while the Commission’s findings are not binding in other nations, this ruling sets the stage for what’s likely to be the most interesting of Qualcomm’s ongoing cases: the United States Federal Trade Commission. The US FTC has been investigating Qualcomm since the start of 2017 over the Apple deal and other aspects of Qualcomm’s business, so the fact that the Commission found enough evidence to fine Qualcomm indicates that the FTC could rule similarly on the same evidence. Never mind any other regulatory bodies out there who haven’t already begun investigating Qualcomm over the Apple deal. As a result this is likely not the last time we’ll see Qualcomm fined for their misdeeds with Apple.
Update: Qualcomm has issued a statement saying that they disagree with the Commission's ruling, and that they will be appealing the fine to the General Court of the European Union.
“We are confident this agreement did not violate EU competition rules or adversely affect market competition or European consumers,” said Don Rosenberg, executive vice president and general counsel of Qualcomm. “We have a strong case for judicial review and we will immediately commence that process.”
Update 01/25: Qualcomm has also sent over a note reiterating that Apple broke the exclusivity agreement with the launch of the iPhone 7 in September of 2016. The agreement was set to expire 3 months later
Source: European Commission