EU slaps Qualcomm with $1.23 billion fine over illegal chip payment to Apple

Posted:
in General Discussion edited January 2018
The European Union on Wednesday announced that it determined chipmaker Qualcomm illegally shut out rivals when it paid Apple billions of dollars to stick with its LTE baseband chips for five years. Qualcomm will pay a hefty price for its misdeeds: 997 million euros, or $1.23 billion U.S.




"Qualcomm paid billions of US Dollars to a key customer, Apple, so that it would not buy from rivals," European Commissioner for Competition Margrethe Vestager said in a statement. "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."

The EU determined that Qualcomm's market dominance in LTE baseband chipsets came about in part because of payments to Apple that violated EU antitrust rules.

Qualcomm entered into its exclusive agreement with Apple in 2011, and again extended the deal in 2013 until the end of 2016. The EU found that Qualcomm's rival chipmakers were "denied the possibility to compete effectively for Apple's significant business, no matter how good their products were."

Internal documents seen by the EU found that Apple "gave serious consideration" to switching part of its baseband chipset supply. But the paid exclusive arrangement from Qualcomm proved to be a factor in Apple not changing, according to the European Commission, which is the executive body of the EU.




Apple eventually started using Intel-supplied modems in the iPhone 7 and iPhone 7 Plus in late 2016. Since then, it has been suggested that Apple could eliminate use of Qualcomm modems entirely from its product lineup.

Qualcomm's troubles extend well beyond its hefty EU fine. The company is also engaged in a $1 billion lawsuit from Apple, claiming payments were withheld as retaliation for Apple's participation in an FTC investigation.




The FTC also sued Qualcomm for antitrust violations last year, and the chipmaker was hit with a $773 million fine by Taiwan's Fair Trade Commission.

Qualcomm saw its net income drop year over year from $1.6 billion to just $168 million late last year, citing Apple's withheld payments as a chief cause.
feudalist
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Comments

  • Reply 1 of 33
    I fine it curious that Qualcomm was the only company that was fined. Will Apple not get fined for taking the money, this seems like something the EU would do. 
  • Reply 2 of 33
    Why does Qualcomm feel the need to engage in such dodgy practices when by all accounts they had the better product?  And it seems bizarre that Qualcomm is fined by the EU for making payments TO Apple, and sued BY Apple for failing to make payments to Apple. What?    (And yes, I understand the two payments were not for the same thing.)

    Seems to be a little typo in there: "Internal documents seen by the EU found that Apple "gave serious consideration" to switching part of its baseband chipset supply to Apple."  I think the author meant Intel rather than Apple. 
    edited January 2018 SpamSandwich
  • Reply 3 of 33
    LukeCage said:
    I fine it curious that Qualcomm was the only company that was fined. Will Apple not get fined for taking the money, this seems like something the EU would do. 
    My first thought exactly. But on second thought: Apple did not force Qualcomm into an exclusive licensing agreement. It didn't lock out any competitors by entering into the agreement. So the EU doesn't really have a case against Apple for abusing any monopoly.
    netmagekurai01
  • Reply 4 of 33
    Good !
    jony0
  • Reply 5 of 33
    Talk about blood on the water...
  • Reply 6 of 33
    If they lose in the US too then I can't see how they can recover from it. The losses might even be too much for a take-over, liquidation looms!
  • Reply 7 of 33
    artharg said:
    LukeCage said:
    I fine it curious that Qualcomm was the only company that was fined. Will Apple not get fined for taking the money, this seems like something the EU would do. 
    My first thought exactly. But on second thought: Apple did not force Qualcomm into an exclusive licensing agreement. It didn't lock out any competitors by entering into the agreement. So the EU doesn't really have a case against Apple for abusing any monopoly.
    So apparently Qualcomm was forcing Apple to buy its chips at a certain price and at that time Apple had no other company to turn to and get cheaper prices. Also Qualcomm wouldn’t license it’s FRAND patents to any other manufacturers for anything less than Apple was paying so Apple really had to just pay up. 
    feudalistkurai01
  • Reply 8 of 33
    tshapitshapi Posts: 292member
    LukeCage said:
    I fine it curious that Qualcomm was the only company that was fined. Will Apple not get fined for taking the money, this seems like something the EU would do. 
    LukeCage said:
    I fine it curious that Qualcomm was the only company that was fined. Will Apple not get fined for taking the money, this seems like something the EU would do. 
    This strikes me as, someone made a phone call. To the person in charge of this department in the eu.  I mean where is this information available for someone to research?
  • Reply 9 of 33
    nhtnht Posts: 4,487member
    Good !
    How is is good when another major US tech company gets slapped with a huge fine by the EU kleptocracy?  Do you really think the EU gives a shit about protecting Intel’s interest or just doing a money grab because they can?

    Granted Apple and Qualcomm is fighting right now but so what? I like cheering on Apple beating Qualcomm or Google as much the next guy here but it’s still “in the family” so to speak.   

    When foreign governments make moneygrabs against US companies, even the ones I’m meh about, it’s a money grab against the US stock market and a money grab against the economy of the US.  I’m sure I have Q buried in some fund or another.

    Qualcomm is just like HP, Westinghouse, Motorola, IBM, DEC, Sun, Intel, Apple, AT&T, Microsoft.  Some of those still around, some of those not (or just in name).

    Ever hear of the Viterbi algorithm?  Invented by a co-founder of Qualcomm, Andrew Viterbi. 

    So it’s another one of US’s inventor/founder tech companies.

    Samsung they can beat on like a drum all day long and I don’t much care.
  • Reply 10 of 33
    This seems completely insane on the face of it, but if it wrecks Qualcomm’s business for good, I’m mildly in favor of it. Still... I don’t see how antitrust possibly applies. These two companies made a private deal. No company is ever guaranteed business with Apple and they don’t need to give EU companies a chance to compete because they are not the government, they’re a bloody private business!
  • Reply 11 of 33
    fallenjtfallenjt Posts: 3,976member
    This seems completely insane on the face of it, but if it wrecks Qualcomm’s business for good, I’m mildly in favor of it. Still... I don’t see how antitrust possibly applies. These two companies made a private deal. No company is ever guaranteed business with Apple and they don’t need to give EU companies a chance to compete because they are not the government, they’re a bloody private business!
    Have you ever heard of Sunshine Act? There’s no such private deal! Any deal preventing competitions will violate Sunshine Act! Kick-back is a form of payment made to Apple to gain its business exclusively. That’s violation.
    netmage
  • Reply 12 of 33
    rob53rob53 Posts: 2,047member
    This seems completely insane on the face of it, but if it wrecks Qualcomm’s business for good, I’m mildly in favor of it. Still... I don’t see how antitrust possibly applies. These two companies made a private deal. No company is ever guaranteed business with Apple and they don’t need to give EU companies a chance to compete because they are not the government, they’re a bloody private business!
    I agree. I think the EU made a money grab and went after the wrong part of Qualcomm's abuse. I didn't think being in a monopoly position meant paying off a company to use your product. That appears to be all the EU is interested in. Early on, Apple had to go with Qualcomm for CDMA modems because (I believe) nobody else had them. Does any country in the EU actually use CDMA? I guess the EU is saying for GSM modems Apple should have been free to use someone else's modems instead of Qualcomm's GSM modems. It appears Apple had to use Qualcomm GSM modems or they wouldn't be able to use their CDMA modems. The money Apple got back from Qualcomm shouldn't even come into play because it wasn't the reason Apple went with Qualcomm in the first place.
    SpamSandwich
  • Reply 13 of 33
    ronnronn Posts: 330member
    Qualcomm should've been hit with the maximum fine of 10%. They're in the EU's sights for another anti-trust suit that they'll probably lose as well. Investigated and/or fined by authorities in China, South Korea, Taiwan and the US. And of course, lawsuits by companies that were victimized by its monopolistic abuses. It couldn't have happened to nicer company.
  • Reply 14 of 33
    Rayz2016Rayz2016 Posts: 4,631member
    So they paid Apple to use their hardware?

    Isn’t this what people usually call ‘a discount’?
    bonobobanton zuykov
  • Reply 15 of 33
    sdw2001sdw2001 Posts: 17,038member
    Qualcomm:  Here's some money to make us your exclusive provider.  

    Apple:  OK.  (takes money)  

    EU:  Hey Qualcomm, give us more money because you gave Apple money.  

    Qualcomm:  Dammit  

    Apple:  LOLZ  
    SpamSandwich
  • Reply 16 of 33
    Rayz2016 said:
    So they paid Apple to use their hardware?

    Isn’t this what people usually call ‘a discount’?

    Not when it forces Apple to only use Qualcomm modems. Then it is called abuse of monopoly.  That is why Qualcomm was fined $1.3 BILLION. 
    netmagepropodronnjohnfrombeyond
  • Reply 17 of 33
    gatorguygatorguy Posts: 20,737member
    Rayz2016 said:
    So they paid Apple to use their hardware?

    Isn’t this what people usually call ‘a discount’?

    Not when it forces Apple to only use Qualcomm modems. Then it is called abuse of monopoly.  That is why Qualcomm was fined $1.3 BILLION. 
    Apple was never "forced" as demonstrated by their use of Intel in some iPhones. There are few entities that can FORCE Apple to do anything.

    Apple was willing to go along with Qualcomm pricing as long as it benefitted their business. Now it presumably doesn't. That's the gist of it. Apple still signs contracts with companies like Philips, LG, Ericsson, Nokia and others that collect royalties based on the entire device price and not just a component. When it is no longer in Apple's interests to do so, and as Apple becomes ever more powerful, they may cause a ruckus with those contracts as well.  They've started similar dust-ups with Nokia and Ericsson claiming unfair licensing practices in recent years only to come around to agreements with them too and settle out-of-court, and paying royalties to the IP owners based on a finished device cost just as Qualcomm would like to continue doing. 

    It's simple business and really nothing more, companies fighting over money to see who can keep more of it. PROFIT!

    It's folks like us on forums that make it into something nefarious because we're fans and proceed to make statements of "unfair, it's against the law", "it's not FRAND!", "no one else does this" and other claims of illegal dealings with little understanding of the industry licensing practices for standards-committed and non-essential IP.
    edited January 2018 SpamSandwichmuthuk_vanalingam
  • Reply 18 of 33
    xbitxbit Posts: 243member
    rob53 said:

    Early on, Apple had to go with Qualcomm for CDMA modems because (I believe) nobody else had them. Does any country in the EU actually use CDMA? I guess the EU is saying for GSM modems Apple should have been free to use someone else's modems instead of Qualcomm's GSM modems. It appears Apple had to use Qualcomm GSM modems or they wouldn't be able to use their CDMA modems. The money Apple got back from Qualcomm shouldn't even come into play because it wasn't the reason Apple went with Qualcomm in the first place.
    "CDMA", as used by Verizon and Sprint in the US, was a proprietary Qualcomm technology. It was a locked ecosystem that Qualcomm controlled. For phones to work on Verizon's network, they needed to use a Qualcomm modem.

    No EU country has ever used Qualcomm's version of CDMA commercially. The EU standardised on GSM (an open standard) early to encourage competition.
  • Reply 19 of 33
    boltsfan17boltsfan17 Posts: 2,161member
    fallenjt said:
    This seems completely insane on the face of it, but if it wrecks Qualcomm’s business for good, I’m mildly in favor of it. Still... I don’t see how antitrust possibly applies. These two companies made a private deal. No company is ever guaranteed business with Apple and they don’t need to give EU companies a chance to compete because they are not the government, they’re a bloody private business!
    Have you ever heard of Sunshine Act? There’s no such private deal! Any deal preventing competitions will violate Sunshine Act! Kick-back is a form of payment made to Apple to gain its business exclusively. That’s violation.
    The Sunshine Act has nothing to do with private businesses. All the act does is create more transparency in the government. 
    edited January 2018 SpamSandwich
  • Reply 20 of 33
    ronnronn Posts: 330member
    Rayz2016 said:
    So they paid Apple to use their hardware?

    Isn’t this what people usually call ‘a discount’?

    Not when it forces Apple to only use Qualcomm modems. Then it is called abuse of monopoly.  That is why Qualcomm was fined $1.3 BILLION. 
    Exactly! Apple was forced to only use Qualcomm modems even when it may have been beneficial to use Intel's for certain models. Then Qualcomm withheld certain rebates as a punishment because they (Qualcomm) got called out for the monopolistic abuses. 
    johnfrombeyond
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