Qualcomm fined $1.2B for violating antitrust rules

Qualcomm headquarters

SAN DIEGO — The European Commission Wednesday announced a $1.2 billion fine against Qualcomm, finding that the San Diego-based company violated antitrust rules by paying billions of dollars to ensure that it would be the exclusive chipmaker for Apple’s iPhones and iPads.

As a result, no rival could compete with Qualcomm, even if it had a better product, Commissioner Margrethe Vestager said.

“Qualcomm illegally shut out rivals from the market for LTE baseband chipsets for over five years, thereby cementing its market dominance,” Vestager said. “Qualcomm paid billions of U.S. 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. This in a sector with a huge demand and potential for innovative technologies. This is illegal under EU antitrust rules and why we have taken today’s decision.”

Qualcomm said it would appeal the fine.

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

Other companies such as Intel attempted unsuccessfully to compete with Qualcomm, the largest manufacturer of LTE chips that allow devices to connect to cellular networks, according to the European Commission.

Qualcomm signed the exclusivity agreement with Apple in 2011. The companies renewed the contract in 2013 that extended it until the end of 2016.

Part of the pact stipulated that Apple must return to Qualcomm a large amount of past payments if it decided to switch to a rival chipmaker. Documents show that Apple had considered switching to Intel chips, but the terms of the agreement inspired the company to stick with Qualcomm, according to the EC.

Apple has since started sourcing some of its chips from Intel.

The fine is equivalent to 4.9 percent of Qualcomm’s total 2017 sales, according to the EC, which manages the business of the European Union.