Antitrust Violation EU levies hefty fine on Qualcomm for alleged Apple payoffs

Brussels delivers latest setback for US chipmaker as it fends off a takeover attempt and battles customers over royalties.
OMG -- there they go again.

European Union authorities slapped a billion-euro fine on chip producer Qualcomm for alleged antitrust violations, even as the US firm is fending off a takeover effort from rival Broadcom.

European Competition Commissioner Margrethe Vestager said Qualcomm paid off Apple for years to use its LTE chips exclusively in its mobile products, essentially blocking other producers, such as Intel, from gaining that business. She levied a fine of €997 million ($1.23 billion) for the violation, equivalent to 4.9 percent of Qualcomm’s 2017 sales.

“Qualcomm paid billions of US dollars to a key customer, Apple, so that it would not buy from rivals,” Ms. 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.”

The chips in question are the LTE baseband chipsets that enable rapid mobile broadband connections. Qualcomm dominates the market for this product with more than a 90 percent share. The EU authorities said Qualcomm made payments to Apple from 2011 to 2016 with the express purpose of preventing Apple from buying the chipsets from other providers. Apple itself was not charged with any violations.

This is illegal under EU antitrust rules. Margrethe Vestager, European Competition Commissioner

“Qualcomm’s behavior denied consumers and other companies more choice and innovation,” Ms. Vestager said in her statement, “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.”

Qualcomm said it would immediately challenge the fine in court. “We are confident this agreement did not violate EU competition rules or adversely affect market competition or European consumers,” said general counsel Don Rosenberg.

With Ms. Vestager as competition commissioner, the EU has levied billions of dollars in fines for everything from anticompetitive behavior to tax avoidance, taking on multinational giants like Google and Apple.

Regardless of the ultimate outcome, the new fine represents a severe setback for Qualcomm as it resists a hostile takeover offer of $103 billion from Broadcom (worth $130 billion with the assumption of debt). In addition, the company has been engaged for months in litigation with Apple over royalty payments.

Last week, the European Commission did give a green light to Qualcomm for its $47 billion takeover of Dutch chipmaker NXP, although it imposed several conditions, such as maintaining certain licenses under terms at least as favorable as currently.

Qualcomm, which has 174 offices worldwide, has 11 offices in Germany, including five in Munich alone.

Joachim Hofer and Till Hoppe cover the IT industry for Handelsblatt. Darrell Delamaide is a Handelsblatt Global editor in Washington, DC. To contact the authors: [email protected], [email protected], and [email protected].