Qualcomm spent billions of dollars buying Apple’s loyalty. It must now shell out €997m in fines after the EU’s antitrust arm, led by Commissioner Margrethe Vestager, said the payments were an illegal ploy to ensure only its chips were used in iPhones and iPads, writes Aoife White.
Apple was cornered by Qualcomm with a 2011 deal that offered “significant” sums and rebates if it only bought the company’s chips, Ms Vestager said.
Both Apple, with around 6,000 employees, and Qualcomm, which is expanding its global support centres, have sizeable facilities in Cork. Qualcomm says it is hiring for its Cork team to boost its “global business and product strategies”.
“Apple was seriously thinking of switching” from Qualcomm to Intel chips “which would have made a big difference to Intel” but could not do so until its Qualcomm pact was about to expire in September 2016, Ms Vestager told reporters in Brussels.
Ms Vestager last year sued the Government over its failure to collect around €13bn in a timely way that Apple owes in back taxes following her 2016 ruling.
The antitrust fine, the EU’s third highest, also comes as Qualcomm tries to fend off a $105bn (€85.5bn) hostile takeover by rival Broadcom and wages war with Apple in numerous court cases around the world over patent licensing.
Qualcomm’s management is under pressure to show shareholders it can manage the Apple dispute and battles with regulators that have already led to fines in China and South Korea.
“Qualcomm strongly disagrees with the decision and will immediately appeal it to the General Court of the European Union,” said the company. The EU decision “does not relate to Qualcomm’s licensing business and has no impact on ongoing operations,” it said. Qualcomm shares fell 1.3% at one stage in New York, valuing the chip maker at $101bn (€82bn).
“This is a huge fine by any standards and shows that Commissioner Vestager is starting 2018 very aggressively,” said Assimakis Komninos, a lawyer at White & Case in Brussels.
The case focuses on LTE baseband chipsets used in the 4G mobile phone standard. Qualcomm warned Apple that it would cease payments if it sold products using other chips.
Ms Vestager said this threat was a key factor for Apple refusing to source from Intel. “It would have cost Apple a lot of money” to quit Qualcomm and it “would have made a big difference to Intel”.
“The outcome is that rivals are prevented from challenging dominant companies with more innovative products,” Ms Vestager said.
The fine represents 4.9% of Qualcomm’s revenue in 2017, the EU said. Ms Vestager said the decision sends a warning to other firms that would contemplate using similar practices: “Don’t go there.”
Qualcomm faces a threat of further fines from a second EU investigation into allegations it deliberately sold internet modem chips below cost from 2009 to 2011 to knock out a rival. EU officials “are still at it with a priority,” Ms Vestager said of that case. There are “no repercussions” for Apple for accepting the deal with Qualcomm and no evidence of wrongdoing by the company, Ms Vestager said.
The decision has parallels with the EU’s 2009 finding that Intel’s rebates to computer manufacturers and payments to a retailer were aimed at squeezing out a smaller chipmaker.
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