Qualcomm fined for abusing exclusivity rebates

Qualcomm has been fined nearly EUR 1 billion over an exclusivity agreement with Apple.

Under a 2011 agreement, Apple committed to exclusively sourcing LTE baseband chipsets from Qualcomm for all Apple smartphones and tablets until the end of 2016.

Qualcomm paid “billions of dollars” to Apple to protect this exclusivity. A breach by Apple would mean losing those payments and paying back some of the rebates.

According to Commissioner Vestager, the exclusivity agreement effectively prevented Apple from sourcing the chips from Qualcomm’s competitors. This conduct amounted to an abuse of dominant position by Qualcomm, whose market share for baseband chipsets was 90%.

Only Qualcomm’s conduct was investigated and the decision did not find or sanction any wrongdoing by Apple. This may seem strange, given Apple’s strong market position as a major multinational company and a key client of Qualcomm. However, the financial constraints on Apple for using other chips were too high, preventing other potential chip suppliers from competing with Qualcomm.

The fact that this exclusivity agreement involved a large company such as Apple does not prevent Qualcomm’s conduct as constituting an abuse of dominance. Apple’s sheer size and competitors’ exclusion for potentially large contracts compounded the impacts of the exclusivity agreement.

This is the first Commission decision in an abuse of dominance case since the Intel judgment in September 2017. The Court of Justice found that the Commission must do a better job when establishing an abuse of dominance. In particular, regulators must examine “all the circumstances” when assessing the anticompetitive nature of exclusivity rebates and undertake a proper “as-efficient competitor” test when the undertakings concerned invoke it as a defence.

The Qualcomm decision, once a redacted version is published, will provide an interesting analysis of the Commission’s implementation of the EU’s highest court “guidance” on these matters.

The Commission’s press release can be found here.

Kim Gillade, Associate, kim.gillade@cms-db.com
Annabelle Lepièce, Partner, annabelle.lepiece@cms-db.com