EU regulators slapped Qualcomm, one of the world’s largest chipmakers, with a fine of €997 million on Wednesday for abusing a dominant position to ensure it would be the exclusive supplier of key chips for Apple smartphones and tablets.
The fine, which is more than 4 percent of Qualcomm’s 2017 revenue, is hefty compared to past EU antitrust penalties and adds to the firm’s troubles following a string of legal setbacks.
Unveiling her decision, the European commissioner for competition argued that Qualcomm had paid billions of U.S. dollars to Apple, one of its key customers, to ensure it did not source chips from Qualcomm’s rivals.
“Qualcomm illegally shut out rivals from the market for LTE baseband chipsets for over five years, thereby cementing its market dominance,” Margrethe Vestager told a news conference in Brussels.
“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,” she said.
Qualcomm’s practice of offering an “exclusivity rebate” to Apple, which went on for five years starting in 2011, effectively ensured that no rival could challenge the chipmaker in the market no matter how good its products were, Vestager added.
Qualcomm said it will appeal the Commission’s decision.
The size of the sanction — and the fact that it follows a first, failed investigation into Qualcomm — underscores the fraught nature of relations between the U.S. semiconductor giant and the EU’s competition regulator.
In 2009, the Commission was forced to close a high-profile probe against Qualcomm after several complainants withdrew their support. But in 2015 the Commission doubled down, opening two fresh inquiries — one of which culminated in today’s sanction.
“Actually it [the fine] is almost five percent, reflecting the fact that this was very illegal behavior and went on for a long time. Yes it is a high fine and I do hope it has a deterrent effect,” said Vestager.
The other case, which pertains to alleged predatory pricing practices, is still pending and has prompted a lawsuit from Qualcomm, which accused Vestager’s services of harassment.
But the €997 million in itself is a major setback for Qualcomm, the world’s largest supplier of baseband chips used in smartphones, and the owner of many technologies needed for phones to operate with 3G or 4G.
The EU fine caps a series of bruising sanctions against Qualcomm issued by authorities in China, Taiwan and Korea, where the line between politics and enforcement can be less clear than in Europe, and where local phone makers can hold greater sway with government.
At the same time, Qualcomm is still fighting a U.S. antitrust lawsuit filed by the Federal Trade Commission in the last days of the Obama administration.
And in yet more troubles, the firm faces civil action suits from Apple in courts from California to Beijing to London. The smartphone maker refuses to keep up payments on licensing fees for Qualcomm technology — a move that prompted the San Diego chip-maker to slash its revenue forecasts.
Vestager’s conclusions are likely to bolster Apple’s position.
At the heart of the EU case is Qualcomm’s supply deal with Apple, which allegedly prevented the world’s most valuable company and third-largest phone-maker from sourcing chips from Qualcomm’s rivals, like Intel.
Qualcomm said previously that Apple demanded the terms that are now under dispute and has accused the $900 billion titan of stoking trouble with regulators to reduce the billions of dollars it currently pays each year in licensing fees.
UPDATE: This article was updated with information that Qualcomm will appeal.