European Union Reverses Qualcomm’s $1 Billion Antitrust Fine
Qualcomm notched a big win in Europe today. After more than four years of legal wrangling, the company has successfully gotten a massive antitrust fine overturned. The €997 million ($1.04 billion) fine was issued following an investigation into payments made to Apple between 2011 and 2016 that ensured the iPhone and iPad would only use Qualcomm chips. However, Europe’s second-highest court now says that procedural irregularities and incorrect analysis makes the fine unenforceable.
Apple uses a lot of custom hardware in the iPhone and iPad, including the A-series and M-series processors. However, it doesn’t make its own modems. It has long gone to Qualcomm for that, and Qualcomm was happy to have Apple’s business. So happy, in fact, that it paid Apple billions of dollars from 2011 to 2016 to ensure Apple didn’t switch to another supplier. The European Commission began investigating this agreement in 2015, alleging that it made it too expensive for Apple to switch to another supplier, which is anti-competitive behavior under EU law.
The huge fine came at a time when Qualcomm’s revenues were falling and it was fending off takeover bids. Rather than pay the fine, Qualcomm fought it all the way to the EU General Court. According to Reuters, the judges said that procedural irregularities affected Qualcomm’s right of defense, and that invalidates the Commission’s analysis of misconduct.
In addition, the court said the Commission never adequately showed that the payments actually reduced Apple’s incentive to switch suppliers. While the payments do look shady, it’s unclear who else could have provided similar LTE chips for Apple at that time. For better or worse, Qualcomm was (and still is) making the best mobile modems in the world. Apple’s latest 5G-equipped devices still have a Qualcomm modem alongside the Apple silicon, and Intel has essentially given up.
The European Commission says it is studying the judgment closely before it decides how to proceed. It could choose to appeal the verdict, but the tide seems to have turned in Qualcomm’s favor. The strength of the General Court ruling could send a message to the Commission and EU antitrust chief Margrethe Vestager. Previously, EU courts invalidated a 12-year-old fine against Microsoft for unfairly pushing AMD out of markets. Later this year, the General Court will rule on Google’s challenge of a record €4.34 billion fine. A ruling in favor of Google is not out of the question.