This morning the European Union’s European Commission became the latest regulatory body to fine Qualcomm over anti-competitive actions undertaken by the company. The investigation, which we’ve been expecting the results of for some time now, found Qualcomm guilty of abusing its dominant market position in LTE modems, with Qualcomm paying Apple to exclusively use its modems. As a result the Commission has levied the largest fine to date against Qualcomm, totaling over €997 million ($1.23 billion).

Qualcomm has been under scrutiny by regulators in one form or another for over a decade at this point. The company has previously been fined by China, South Korea, Taiwan, and there is still an ongoing investigation in the United States. While the precise infraction has varied some from fine to fine, in all cases regulators have cited Qualcomm for abusing its position in the cellular modem market in order to freeze out any competition. This has included their position to forcibly bundle unrelated patents and refusing to license out standards essential patents to customers who didn’t buy Qualcomm chips.

The European Commission’s case, by contrast, is perhaps the most interesting of the cases as it’s the most contemporary, dealing with Qualcomm’s actions from 2011 to 2016. The Commission’s case is solely focused on LTE shenanigans – other cases have tended to focus on CDMA or a mix of CDMA and LTE – with the regulatory body finding sufficient evidence of an anti-competitive Apple deal to charge the company under antitrust laws.

The Apple deal, which we first found out about in a US FTC investigation last year, had Qualcomm paying Apple royalty rebates in order to ensure Apple’s exclusive use of Qualcomm’s LTE modems. And while royalty rebates alone are not inherently illegal, the fact that Qualcomm was doing it in order to prevent other competitors from gaining a foothold in the LTE modem market – primarily Intel – is what makes it illegal. And while it’s just one of many handset vendors in the EU, Apple ships a large enough percentage of all handsets that landing an Apple deal can (and did) make or break an LTE modem vendor; so stopping Apple from looking outside Qualcomm would go a long way towards ensuring no other competition for Qualcomm cropped up.

Meanwhile, Apple’s cooperation with investigators has driven a large wedge between the two companies. Apple has been suing Qualcomm for another $1 billion in royalty rebates it says are still owed, and Qualcomm has been suing Apple for what they see as an unfounded global attack against the company. Apple has since begun multi-sourcing modems – starting with Intel’s XMM 7360 for the iPhone 7 in 2016 – so the European Commission’s case is more about punishing Qualcomm for past actions than it is about correcting any present market conditions.

Finally, while the Commission’s findings are not binding in other nations, this ruling sets the stage for what’s likely to be the most interesting of Qualcomm’s ongoing cases: the United States Federal Trade Commission. The US FTC has been investigating Qualcomm since the start of 2017 over the Apple deal and other aspects of Qualcomm’s business, so the fact that the Commission found enough evidence to fine Qualcomm indicates that the FTC could rule similarly on the same evidence. Never mind any other regulatory bodies out there who haven’t already begun investigating Qualcomm over the Apple deal. As a result this is likely not the last time we’ll see Qualcomm fined for their misdeeds with Apple.

Update: Qualcomm has issued a statement saying that they disagree with the Commission's ruling, and that they will be appealing the fine to the General Court of the European Union.

“We are confident this agreement did not violate EU competition rules or adversely affect market competition or European consumers,” said Don Rosenberg, executive vice president and general counsel of Qualcomm. “We have a strong case for judicial review and we will immediately commence that process.”

Update 01/25: Qualcomm has also sent over a note reiterating that Apple broke the exclusivity agreement with the launch of the iPhone 7 in September of 2016. The agreement was set to expire 3 months later

Source: European Commission

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  • id4andrei - Wednesday, January 24, 2018 - link

    Excuse me, who evaluated the "overcharges"? You're also in the wrong since Apple has no contract with Qualcomm, it is Foxconn that has a contract and they pay a percentage of the factory price.

    I've heard another side of the story that Jobs dangled a wimax iphone to get Qualcomm to pay Apple. Knowing Jobs it sounds pretty plausible.
    Reply
  • osxandwindows - Wednesday, January 24, 2018 - link

    Yeah, because QC totally didn't force them to sign a contract because there was no competition in 2011. Reply
  • id4andrei - Thursday, January 25, 2018 - link

    No one extorted or forced the ruthless Steven P Jobs into anything. It's Steven P Jobs that did the hand wringing around the industry. Reply
  • dromoxen - Monday, January 29, 2018 - link

    Handwringing is normally considered a sign of distress or anxiety. I think the phrase you are looking for is arm-twisting. Quite apt really. Any such agreement as this should be outlawed.. all customers should pay the same price, any backdoor deals are anti-consumer. Reply
  • Yojimbo - Wednesday, January 24, 2018 - link

    I doubt it's Apple's responsibility to watch out for Qualcomm's practices towards their competitors. It certainly doesn't make sense to me that it would be. I don't remember computer manufacturers being held liable in the Intel situation.

    Just imagine: a company sells you a part a below cost. This is deemed illegal dumping. Are you responsible as a buyer of that part? No, that's ridiculous, you can't be expected to know their cost structure and it isn't your business anyway. You just are participating in the market, picking the most favorable deal. It's the same with Apple. They were just participating in thr market picking their most favorable deal. Are you suggesting that Apple somehow conspired with Qualcomm to prevent other modem manufacturers from entering the market? Why on Earth would they do that? More modem competition would only be good for Apple. Unless you have evidence for such a thing it sounds ridiculous.
    Reply
  • HStewart - Thursday, January 25, 2018 - link

    "This looks very much like what Intel did back in the day to keep builders from using AMD CPUs."

    One possible big difference is that AMD was using instruction set designed by Intel, did Apple use same logic designed by Qualcomm or did they completely create something.

    For example ARM instruction is different then x86 instruction. I believe ARM license it instruction set to other vendors - Intel did not originally - that why AMD was called ( and still is ) a Clone Intel CPU.
    Reply
  • Surfacround - Sunday, January 28, 2018 - link

    AMD is not quite a clone of INTEL ... it was in the “bad” ole 32 bit exclusive days...
    BUT now days the 64 bit”ness” of an INTEL is a “clone” of AMD processors...
    Reply
  • id4andrei - Wednesday, January 24, 2018 - link

    After all this is over Qualcomm would have to renounce their monopolistic bundling practice. They use patent licensing as a way to sell chips. In the end Samsung would get its wish and be able to sell Exynos handsets in the States. Reply
  • asmian - Wednesday, January 24, 2018 - link

    > anti-competitive actions untaken by the company
    > Qualcomm was doing it on order

    The lack of proofreading/editorship here presumably in a pointless race for deadline strikes again. :(
    Reply
  • Ryan Smith - Wednesday, January 24, 2018 - link

    Thanks! Reply

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