Qualcomm receives EUR 997 million fine for abusing its dominant position
On 24 January 2018, the European Commission (“Commission”) fined Qualcomm approx. EUR 997 million (representing 4.9% of Qualcomm’s total turnover in 2017) for having abused its dominant position in the market for LTE baseband chipsets. The chipsets enable smartphones and tablets to connect to cellular networks and are used for voice and data transmission.
In 2011, Qualcomm had entered into an agreement with key customer Apple whereby Qualcomm agreed to make substantial payments to Apple and, in return, Apple agreed to exclusively use Qualcomm’s chipsets in its iPhone and iPad devices. As the agreement was extended to the end of 2016, the conduct lasted for over five and a half years. If Apple had switched supplier, not only would Qualcomm have stopped making relevant payments in the future, but (for most of the term of the agreement) Apple would also have had to return a substantial portion of the payments that had already been made to it by Qualcomm in accordance with the agreement.
The Commission considered that the conduct constituted abusive behavior as it excluded rivals from the market and deprived consumers of both choice and innovation.
The Commission estimated Qualcomm to have had a market share of more than 90% on the global market for the supply of chipsets for the majority of the period for which the agreement was in force (2011- 2016). Furthermore, taking into consideration e.g. the significant amounts of money paid by Qualcomm to Apple, evidence (including Apple’s internal documents) confirming that Qualcomm’s payments reduced Apple’s incentives to switch to rivals, the importance of Apple as a customer, and the lack of counterbalancing efficiencies presented, the Commission concluded that consumers and competition had suffered as a result of the conduct.
Qualcomm has stated that it strongly disagrees with the decision and will appeal it to the General Court of the European Union.
In addition to the investigation concerning exclusivity payments, there is a parallel investigation ongoing by the Commission concerning whether Qualcomm had abused its dominant position by selling chipsets below costs (i.e. predatory pricing).
Source: 24/1/2018 Press release from the European Commission