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The european commission has fined qualcomm €997 million for abuse of the market for long-term evolution (“LTE”) (also known as 4G) baseband chipsets for mobile devices. According to the Commission, Qualcomm blocked rival companies from the market for five years by paying Apple substantial amounts to use its chips exclusively in the iPhone and iPad.

THE CORE ISSUE

Qualcomm is the leading worldwide supplier of LTE baseband chipsets for mobile devices. Intel, another chipset manufacturer active on this market, tried to compete with Qualcomm for certain customers, including Apple, considered a key customer on the market by the Commission.

In 2011, Qualcomm and Apple agreed that Qualcomm would pay Apple substantial amounts if Apple used Qualcomm chips exclusively in the iPhone and iPad. In the event that Apple launched a mobile device using a rival’s chipsets, Qualcomm would terminate the payments and Apple would have to repay a large part of those already made.

According to the European Commission, the agreement with Apple lasted until 2016 and enabled Qualcomm to shut out rivals from the market for over five years, thereby cementing its market dominance. In particular, the Commission considers that Qualcomm’s competitors were deprived of being able to effectively compete for Apple’s business, no matter how good their products were. This also denied them commercial opportunities with other possible clients that could have followed Apple.

The ruling is not yet available, but according to the Commission’s press release, internal documents from Apple prove that the technology giant considered switching to the Intel chipset, but the agreement with Qualcomm was a decisive factor in finally not changing supplier. The Commission also highlights that in 2016, on terminating the agreement with Qualcomm, Apple began to buy Intel’s chipsets.

INFRINGEMENT OF THE COMMUNITY ANTITRUST RULES

The European Commission considers that Qualcomm held a dominant position in the world bandbase chipset market for mobiles at least between 2011 and 2016, and that the practices described constitute abuse of a dominant position contrary to the European antitrust regulations.

In its analysis, the Commission took into account factors such as qualcomm’s high market share that exceeded 90% during the greater part of the alleged infringement, the importance of Apple as a key customer on the chipset market and the large amounts paid by Qualcomm. It is worth noting that the Commission rejected a price-cost test presented by Qualcomm, as it considered that the test failed to support Qualcomm’s claim that its payments to Apple were not capable of having anti-competitive effects.

The Commission concluded that the exclusivity agreement with Apple had a significant adverse impact on competition, and had deprived consumers and other companies of more possibilities of choice and innovation.

To be continued

The fine represents 4.9% of qualcomm’s revenue in 2017. Qualcomm has already announced it will appeal the Commission’s ruling at the General Court of the European Union.

This is not the only open front the chipmaker has in Brussels. In December 2015, Qualcomm received another statement of objections from the European Commission, in this case related to predatory pricing.

We also recall that in 2015 china’s antitrust authority, the national development and reform commission (ndrc), imposed a record €859 million fine on qualcomm for abuse of dominant position, here in relation to the royalty fees and sales conditions of its licensing agreements.

Autora: María López

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