Qualcomm fined €997m for abusing dominant market position

Out-Law News | 25 Jan 2018 | 5:19 pm | 2 min. read

US technology company Qualcomm has been fined more than €997 million by the European Commission over a breach of EU competition rules.

The regulator said Qualcomm abused a dominant position in the market for LTE baseband chipsets. That technology helps connect devices to mobile networks providing 4G services.

Qualcomm said it "strongly disagrees" with the Commission's decision and plans to appeal against it to the EU's General Court.

Central to the case, and the Commission's decision, are payments that Qualcomm made to one of its customers, US technology giant Apple, which the Commission said incentivised Apple not to purchase rival products from competitors.

The payments agreement between the companies was in place for more than five and a half years and influenced Apple's decision-making on where to source chipsets, the Commission said.

EU competition commissioner Margrethe Vestager 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 [this] decision," she said.

The €997,439,000 fine imposed on Qualcomm represents 4.9% of the company's annual global turnover in 2017. The European Commission has the power to impose fines of up to 10% of a company's annual global turnover where it finds they have breached EU competition rules.

Don Rosenberg, executive vice president and general counsel of Qualcomm, said: "We are confident this agreement did not violate EU competition rules or adversely affect market competition or European consumers. We have a strong case for judicial review and we will immediately commence that process."

Giles Warrington, specialist in competition law at Pinsent Masons, the law firm behind Out-Law.com, said: "This decision is the first abuse of dominance decision by the Commission since the Court of Justice of the EU overturned the General Court's Intel loyalty rebates judgment last September. In that case, the CJEU clarified the extent of the Commission's duty to assess economic evidence submitted by a company under investigation."

"In this case, Qualcomm submitted its own evidence which, it claimed, meant no abuse arose, but the Commission seemingly relied on its own economic evidence. This shows the Commission's continued feeling of confidence in its own analysis when pursing exclusionary abuse cases in the technology sector," he said.

The Commission is also conducting a second investigation into Qualcomm which relates to alleged predatory pricing of dongle products. This followed on from a complaint by its rival, Icera, in 2010, which alleged that Qualcomm was selling its products to two customers at prices below cost. The Commission has suggested that this investigation has some way to run.

Earlier this week, the Commission gave Qualcomm conditional approval for its planned $47 billion takeover of Dutch semiconductor business NXP. Qualcomm has made a number of commitments, including in relation to the licensing of some of NXP's patents, to address concerns that the Commission had previously expressed about the impact the deal could have on competition.