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Qualcomm slapped with billion euro fine for ‘abusing’ LTE dominance

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Qualcomm has been fined €997m (£868m) by the European Commission (EC) for “abusing its market dominance in LTE baseband chipsets”.

Baseband chipsets enable smartphones and tablets to connect to cellular networks and are used both for voice and data transmission.

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 EC believes that with this deal Qualcomm intended to hold rivals back from competing in the smartphone market, a practice that is illegal under EU antitrust rules.

Commissioner Margrethe Vestager, in charge of competition policy, 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.”

Apple’s iPhone and iPad were undoubtedly the most significant products sold in the fledgling smartphone and tablet market by sales and still out-compete most other brands.

The EC said this meant that no rival could effectively challenge Qualcomm in the market, no matter how good their products were, and this denied consumers and other companies’ choice and innovation, a significant hurdle in a sector that thrives on innovative technologies.

Qualcomm is by far the world’s largest supplier of LTE baseband chipsets. 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.

The agreement between Qualcomm and Apple was that it would cease 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.

Internal documents show that Apple gave serious consideration to switching part of its baseband chipset requirements to Intel and the exclusivity condition was a key factor in why Apple decided against doing so, until the agreement came to an end.

Only 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.

The EC said the fine “takes account of the duration and gravity of the infringement and is aimed at deterring market players from engaging in such anti-competitive practices in the future.”

The fine represents 4.9 per cent of Qualcomm’s turnover in 2017.

Qualcomm said it “strongly disagrees with the decision” and will immediately appeal, but that it will have no impact on its “ongoing operations”.

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

In 2014, China's competition regulator declared that Qualcomm had a monopoly and accused it of overcharging and abusing its market position. 

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