Margrethe Vestager – Photo © European Union 2018
(BRUSSELS) – Brussels fined Qualcomm EUR 997m Wednesday for abusing its market dominance in LTE baseband chipsets, paying billions of US dollars to a key customer, Apple, so that it would not buy from rivals.
“Qualcomm illegally shut out rivals from the market for LTE baseband chipsets for over five years, thereby cementing its market dominance,” said Competition Commissioner Margrethe Vestager: “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 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 innovative technologies. This is illegal under EU antitrust rules and why we have taken today’s decision,” she added.
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, the Commission says 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, says the Commission.
While market dominance is, as such, not illegal under EU antitrust rules, dominant companies are deemed to have a special responsibility not to abuse their powerful market position by restricting competition, either in the market where they are dominant or in separate markets.
More information on today’s decision is available on the Commission’s competition website in the public case register under the case number 40220.
