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From Antitrust Law Daily, January 24, 2018

Qualcomm hit with €997 million EC fine, vows to appeal

By Jeffrey May, J.D.

Today, European Commission (EC) announced that it has fined Qualcomm €997,439,000 (roughly U.S. $1.2 billion) for abusing its market dominance in LTE baseband chipsets. Qualcomm was found to have prevented rivals from competing in the market by making significant payments to a key customer, Apple, on condition it would not buy from rivals. An EC investigation into concerns of potential predatory pricing is ongoing.

Qualcomm released a statement, saying that it strongly disagreed with the decision. The company also said that it would appeal the decision to the General Court of the European Union. Qualcomm is a global semiconductor company and the world’s largest supplier of baseband chipsets.

According to the EC announcement, Qualcomm prevented competition on the merits. The EC concluded that Qualcomm held a dominant position in the global market for LTE baseband chipsets and abused this market dominance by entering into exclusivity arrangements with Apple that denied Qualcomm’s rivals the possibility to compete. 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.

In July 2015, the EC opened two formal antitrust investigations to assess concerns that Qualcomm might have abused a dominant position in the area of baseband chipsets through two separate actions. In December of that year, the EC sent two statements of objections (SOs) to Qualcomm in the separate investigations, outlining the authority’s preliminary view that the company had abused its dominant position in the worldwide markets for 3G (UMTS) and 4G (LTE) baseband chipsets, in breach of European Union antitrust rules. The first SO outlined that, since 2011, Qualcomm paid significant amounts to a major smartphone and tablet manufacturer on condition that it exclusively use Qualcomm baseband chipsets in its smartphones and tablets. The second SO took the preliminary view that, between 2009 and 2011, Qualcomm engaged in predatory pricing by selling certain baseband chipsets at prices below costs, with the intention of hindering competition in the market.

In reaching its decision announced today, the EC considered, among other things, Qualcomm's dominance and Apple’s importance as a customer in the market for LTE baseband chipset suppliers. The EC also said that Qualcomm did not demonstrate that the exclusivity condition created any efficiencies, which could have justified Qualcomm’s practices.

The fine takes into account the duration and gravity of the violation, according to the EC. It represents 4.9% of Qualcomm's turnover in 2017. Qualcomm also has been ordered to refrain from such conduct in the future.

FTC suit. On this side of the Atlantic, in the final days of the Obama Administration, the FTC sued Qualcomm for maintaining its monopoly by, among other things, entering into exclusive dealing arrangements with Apple in exchange for partial royalty relief. According to the agency, this conduct "denied other baseband processor suppliers the benefits of working with a particularly important cell phone manufacturer and hampered their development into effective competitors." In June 2017, the federal district court in San Jose, California, denied Qualcomm’s motion to dismiss FTC claims. Qualcomm also faces monopoly claims filed in private actions.

Companies: Qualcomm Inc.; Apple Inc.

MainStory: TopStory Antitrust

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