Qualcomm Fined $1.2B Over iPhone Chip Payments
Qualcomm (NASDAQ: QCOM) has been fined $1.2 billion by the European Commission for paying Apple billions to ensure Qualcomm chips were used in iPhones and iPads. The European Commission decided to fine Qualcomm the equivalent of 4.9 percent of its 2017 turnover for the anti-competitive behavior. The U.S. Federal Trade Commission is also investigating Qualcomm’s Apple deal.
The Commission found that between 2011 and 2016, Qualcomm paid Apple for Apple exclusively using Qualcomm’s LTE baseband chips in its most popular devices. The agreement meant that all iPhone and iPads during that period would only ship with Qualcomm LTE chips. The European Commission found that the payments were made with the sole aim of blocking Qualcomm’s LTE chipset market rivals, such as Intel. Rivals were completely shut out from Apple’s products.
European Competition Commissioner Margrethe Vestager said in a statement, “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.” Her statement continued, “Qualcomm’s behavior denied consumers and other companies more choice and innovation – and this in a sector with a huge demand and potential for innovative technologies.” Qualcomm says it will appeal the ruling and the fine.
In January 2017, the Federal Trade Commission complained that Qualcomm had engaged in anticompetitive patent licensing practices, sparking several investigations. Critics have pointed out that even if Apple didn’t initiate the anti-competitive behavior, the company agreed to the terms and accepted the payments instead of rejecting Qualcomm’s offer. Some are calling for Apple to be punished as well.
This may just be the beginning of Qualcomm’s problems. Another EU investigation is probing Qualcomm’s predatory pricing with British phone software maker Icera. Qualcomm is also fighting with Apple’s manufacturing partners regarding licensing fees. Broadcom recently attempted to acquire Qualcomm, but its $105 billion offer was rejected.
Qualcomm is also locked in a legal battle with Apple regarding patent royalty rebates and trade secrets. Apple has sued the chipmaker last year for $1 billion, accusing it of charging unfair royalties. A Qualcomm countersuit followed in April. Qualcomm then sought iPhone and iPad import bans in the United States last summer, leading Apple to countersue with a patent infringement claim.