Europe fines Qualcomm €997 million for abuse of dominant market position
Staff Writer |
The European Commission (EC) has fined Qualcomm €997m for abusing its market dominance in LTE baseband chipsets.
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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.
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.
Qualcomm is by far the world's largest supplier of LTE baseband chipsets. But there are other chip manufacturers active in this market – Intel (the largest supplier for chipsets used in computers), in particular, has tried to challenge and compete with Qualcomm for customers.
Then as today, Apple was a key customer for LTE baseband chipsets, being an important maker of smartphones and tablets with a premium brand image worldwide.
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, for most of the time the agreement was in place, 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.
This meant that Qualcomm's rivals were denied the possibility to compete effectively for Apple's significant business, no matter how good their products were. They were also denied business opportunities with other customers that could have followed from securing Apple as a customer.
In fact, 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. But until then, Qualcomm's practices denied consumers and other companies the benefits of effective competition, namely more choice and innovation.
Qualcomm's practices amount to an abuse of Qualcomm's dominant position in LTE baseband chipsets by preventing competition on the merits. ■