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European Commission fines Qualcomm $1.23bn

Chip maker is alleged to have abused dominant market position

European Commission fines Qualcomm $1.23bn
According to the European Commission, Qualcomm shut out rivals from the market for LTE baseband chipsets for over five years.

The European Commission has fined Qualcomm $1.23bn for allegedly paying Apple to exclusively use Qualcomm LTE chips.

Chip maker Qualcomm, is already in the midst of several lawsuits with Apple along with a hostile takeover bid by Broadcom and the latest fine makes matters more complicated.

The European Union's antitrust regulator, the European Commission, has brought a $1.23bn fine against Qualcomm for alleged "abuse of dominant market position." The case revolves around an exclusivity deal that the European Commission alleges Qualcomm "illegally" reached with Apple to ensure that Apple would only buy LTE chips from Qualcomm rather than from rivals such as Intel.

Qualcomm, according to the European Commission, "illegally shut out rivals from the market for LTE baseband chipsets for over five years, thereby cementing its market dominance."

"Qualcomm paid billions of US Dollars to a key customer, Apple, so that it would not buy from rivals," the commission said in its news release.

Apple has long relied on Qualcomm for LTE baseband chipsets - which enable the connection to cellular networks - in its iPhones and LTE-enabled iPads.

The payments by Qualcomm to Apple "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 European Commission wrote.

The European Commission said Qualcomm's actions "meant that no rival could effectively challenge Qualcomm in this market, no matter how good their products were. As a result, consumers were denied "more choice and innovation, and this in a sector with a huge demand and potential for innovative technologies," it said.

The agreement is "illegal under EU antitrust rules," the European Commission said. Qualcomm held a 90% share in the LTE baseband chipset market between 2011 and 2016 - the time period in question in the case - and Qualcomm "has abused this market dominance by preventing rivals from competing in the market," the European Commission stated.

"Based on a variety of qualitative and quantitative evidence, the Commission found that both consumers and competition have suffered as a result of Qualcomm's conduct," the European Commission added.

The alleged exclusivity deal dates back to 2011, when Qualcomm is alleged of having agreed to make "significant payments" to Apple in exchange for solely using Qualcomm LTE chipsets in the iPhone and iPad. The deal was renewed in 2013 to extend through 2016, according to the European Commission. All in all, Qualcomm paid billions of dollars to Apple, the European Commission said.

The deal stated that Qualcomm would stop the payments in the event that Apple launched a device with another vendor's LTE chips, the European Commission said. And "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," the European Commission said.

Notably, Apple accounts for approximately one-third of all demand for LTE chipsets, according to the European Commission. "By making sure that rivals had no chance to compete for any of Apple's important business, Qualcomm's conduct had an effect on the LTE baseband chipset market as a whole," the European Commission wrote.


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