On Wednesday 24 January, the European Commission handed down a fine of €997 million to the American company Qualcomm for abuse of dominant position on the semiconductor market supplying LTE baseband chipsets.
Once again, European Competition Commissioner Margrethe Vestager has gone after a US giant, a few months after the record fine of €2.42 billion handed to Google (see EUROPE 11817). But this time, it is Qualcomm, the world’s largest producer of LTE baseband chipsets, that has come in for a fine of €997.439 million, or 4.9% of its global turnover in 2017.
In 2011, the company, which held a dominant position on this global market between 2011 and 2016 (market share of more than 90%), signed an agreement with Apple, which was renewed in 2013, whereby it undertook to pay significant amounts to the IT giant on condition that it exclusively use its brand’s chipsets for the design of the iPhone and iPad devices. The expiry date on this agreement was set for 2016.
Under this agreement, Qualcomm would have ceased to pay the amount in question to Apple if the latter decided to use the technology of one of its competitors. Apple would, moreover, have been required to pay back a large part of the money received to its contractual partner. This means that Qualcomm’s competitors were unable to bring any real competition to bear over potential contracts with Apple or other companies working with the US giant.
Another argument in favour of the fine handed down to Qualcomm is that the Commission’s investigation, launched on 16 July 2015 (see EUROPE 11361), showed that Apple had seriously considered entering into a contract with one of Qualcomm’s competitors, Intel, over the period in question, but the agreement with Qualcomm prevented it from doing so. It was not until September 2016, when the contract was about to expire, that Apple was able to place an order with Intel.
Only Qualcomm fined. As a press conference, Vestager took pains to stress that “the fact that it [Qualcomm] has become dominant [on the baseband chipsets market] is not a problem” under EU law. However, the company’s colossal share of this market between 2011 and 2016 called for “extra vigilance”, she explained.
The Commission notes that Qualcomm blocked the exercise of competition in its intrinsic qualities. In light of the magnitude of the agreement, in particular given the fact that Apple represented around one third of all demand for LTE chipsets between 2011 and 2016 and the scope of Qualcomm’s dominant position, the institution found that the company’s behaviour had indeed had an impact on the whole of the market, without any justification on the grounds of efficiency gains stemming from this type of agreement. It therefore considered that the chipset manufacturer’s practices had harmed both consumers and competition.
The Commission therefore concluded that there had been an abuse of dominant position on the LTE baseband chipsets market, fining the company nearly €1 billion and ordering it to desist from such practices.
Apple, however, escaped without a fine. The Commission found that Qualcomm had imposed conditions on Apple, which could not reasonably turn to alternative suppliers, and concluded that there had not been a cartel-style arrangement between the companies.
Qualcomm to appeal against the decision. Qualcomm lost no time in reacting to the Commission’s decision, announcing its intention of appealing against it before the Court of Justice of the EU. “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. (Original version in French by Lucas Tripoteau)