Smartphone chip manufacturer Qualcomm has been fined $1.2bn by the EU for paying Apple “billions of dollars” to use only its chipsets in iPhones and iPads.
The European Commission said Qualcomm “illegally shut out rivals from the market for LTE chipsets for over five years”.
It said the illicit agreement made clear Qualcomm would cease the payments to Apple if it launched a device with a chipset supplied by a rival.
Furthermore, 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 already received if it switched suppliers
EU competition commissioner Margrethe Vestager said, “Qualcomm paid billions of US dollars to a key customer, Apple, so that it would not buy from rivals.
‘No rival could challenge Qualcomm’
“These payments 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.
“This meant that no rival could effectively challenge Qualcomm in this market, no matter how good their products were.
“Qualcomm's behaviour denied consumers and other companies more choice and innovation – and this in a sector with a huge demand and potential for innovative technologies. This is illegal under EU antitrust rules and why we have taken today’s decision.”
While the fine is huge, the EU could have fined Qualcomm up to 10% of its annual turnover, putting the potential figure as high as $2bn.
Ironically, Apple and Qualcomm are engaged in a legal battle after Apple sued Qualcomm for just under $1bn for allegedly withholding patent royalty rebates.
The news comes as Qualcomm tries to fight a hostile takeover bid from rival Broadcom.
Qualcomm yesterday wrote to Broadcom shareholders urging them not to vote for the proposed board members at Broadcom’s AGM, saying a Broadcom takeover would raise “significant regulatory and national security risks”.
No regulatory approval
The letter claims that in the two months since making their hostile proposal, Broadcom had not taken the necessary steps to start the regulatory approval process in most countries around the world.
It also says Broadcom’s claim it can deliver immediate cash to Qualcomm stockholders is “completely false”.
“Even if Broadcom were to make a proposal that delivered fair value to Qualcomm stockholders, the complex regulatory challenges mean that Broadcom would not deliver that value to Qualcomm stockholders for what is likely to be 18 months or more – if ever,” the letter states.