Qualcomm was hit with a $1.2 billion fine for paying Apple to exclusively use its chips in iPhones and iPads, a move EU regulators said was an abuse of its dominant position.
In a statement, EC competition commissioner Margrethe Vestager said Qualcomm had “illegally shut out rivals from LTE baseband chipsets for over five years, thereby cementing its market dominance”. The commissioner added Qualcomm had paid billions to Apple in return for exclusivity, making the deal more than just about offering a lower price to the device vendor.
“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 innovation technologies,” Vestager added.
Qualcomm said it will appeal the decision.
The commission probed payments made by Qualcomm to Apple between 2011 and 2016, a period when Apple was a key customer for LTE baseband chipsets. The EC explained Qualcomm signed an agreement with Apple in 2011 committing to make significant payments to the iPhone maker for exclusive use of its chipsets: in 2013, the agreement was extended for an additional three years.
Under the terms of the agreement, the commission said, Qualcomm stated it would stop paying Apple if it launched devices using “a chipset supplied by a rival”. Apple would also have had to return a large part of the payments to Qualcomm it had received in the past if it chose to switch suppliers.
Qualcomm maintains its practices are fair, given the innovation contained in its chipsets.
The relationship between Apple and Qualcomm has since turned distinctly sour as the pair became embroiled in long-running legal spat regarding royalty payments and licensing terms. Apple is reportedly now developing future iPhones without Qualcomm technology altogether, instead relying on rivals including Intel.
Other regulators, including the US Federal Trade Commission are also investigating Qualcomm’s relationship with Apple, all of which comes at a time when Qualcomm is attempting to fend off a hostile takeover attempt by Broadcom.
The EC added the $1.2 billion fine represents 4.9 per cent of Qualcomm’s turnover in 2017.