European Commission hits Qualcomm with $1.2 billion antitrust fine

Qualcomm got another round of bad news this morning, this time from the European Commission. The EC has imposed a €997 million ($1.23 billion) fine on the mobile silicon designer for "abusing its market dominance in LTE baseband chipsets." The investigation stemmed from an exclusivity agreement between Apple and Qualcomm in which the iPhone maker received "billions of dollars" in payments in exchange for using Qualcomm's modems in iPhones and iPads. That agreement began in 2011, was extended in 2013, and began to wind down toward the end of 2016, when Apple began sourcing LTE modems from Intel, as well.

The European Commission believes this agreement prevented Intel (or other competitors) from challenging Qualcomm's dominant position in LTE modems during the period because of two incentives. Not only would Qualcomm stop paying Apple in the event that it began employing LTE chipsets from other sources in iPhones and iPads, but Apple would also be required to repay significant portions of the payments it had already received for exclusively using Qualcomm chipsets in the past.

The EC established that Qualcomm did indeed hold a dominant position in the LTE modem market thanks to its high market share in the region—over 90% over the majority of the 2011-2016 period—and the high barriers to entry involved in creating a competitive LTE modem. The EC emphasizes that market dominance alone is not illegal under European Union antitrust rules, but that companies operating in the EU have a "special responsibility not to abuse their powerful market position by restricting competition" as Qualcomm's exclusivity agreement apparently did.

For its part, Qualcomm "strongly disagrees with the decision," believes that it did not violate any EU rules, and intends to seek judicial review in the matter. This news comes in the wake of a similar fine levied by the Taiwan Fair Trade Commission in October and under the cloud of an ongoing investigation by the US Federal Trade Commission that also includes Qualcomm's exclusivity agreement with Apple among its complaints.

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