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Qualcomm is fined $1.2 billion by EU antitrust officials

Margrethe Vestager, EU commissioner for competition, spoke at a news conference in Brussels Wednesday announcing that the EU Commission has handed chipmaker Qualcomm a $1.2 billion antitrust fine.
Margrethe Vestager, EU commissioner for competition, spoke at a news conference in Brussels Wednesday announcing that the EU Commission has handed chipmaker Qualcomm a $1.2 billion antitrust fine.OLIVIER HOSLET/European Pressphoto Agency/Shutterstock

European antitrust officials hammered Qualcomm with a $1.2 billion fine on Wednesday, saying the American chipmaker, whose technology underpins much of the world’s mobile phone industry, had abused its dominant market position to squeeze out competitors.

The penalty of 997 million euros follows a two-year investigation and is the latest move by regional regulators against a US tech giant. Officials in Brussels say that Qualcomm offered financial incentives to Apple so that it would buy equipment solely from the chipmaker. Qualcomm immediately said it would appeal the ruling, which would probably extend the case, originally announced in the summer of 2015, for years to come.

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The decision on Wednesday bolsters the argument that Margrethe Vestager, Europe’s antitrust chief, has become the world’s most aggressive regulator of the world’s technology sector. In recent years, Vestager’s office has mounted a concerted campaign against tax avoidance, anticompetitive behavior, and the mishandling of private data. In June, it fined Google a record $2.7 billion for unfairly favoring some of its own services over those of rivals.

Those moves have prompted complaints from US technology giants that they are being unfairly targeted, but European Union officials strongly deny the accusations.

In the latest ruling, European regulators found that Qualcomm, the world’s largest maker of smartphone chips, abused its market dominance by preventing rivals from competing in the smartphone chip market thanks to an agreement in which it paid Apple to exclusively use its chips in iPhones and iPads between 2011 and 2016.

“Qualcomm illegally shut out rivals from the market” for a particular kind of microchip, Vestager said in a news release, “thereby cementing its market dominance.”

“Qualcomm paid billions of US dollars to a key customer, Apple, so that it would not buy from rivals,” she added. “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.”

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The European Commission, the European Union’s executive arm, found that Qualcomm’s practices had a significant, detrimental impact on competition in the region. “It excluded rivals from the market and deprived European consumers of genuine choice and innovation,” the commission said.

Vestager said that she could not say how much Apple had ultimately received from Qualcomm in payments, but that it was in the “billions of dollars.”

She said that internal documents reviewed as part of the inquiry showed that Apple had seriously considered using chips made by a rival manufacturer, Intel, during the period of its agreement with Qualcomm, but did not do so until the deal with Qualcomm had concluded.

If Apple had introduced a smartphone using products from a different chipmaker, she said, Apple not only would have lost future payments from Qualcomm, but also would have been forced to pay back some of the money it had already received.

Vestager said that Apple would not face any repercussions because the inquiry had been focused on Qualcomm’s practices. European regulators are also continuing a separate investigation into preliminary findings that Qualcomm sold its chips below cost from 2009 to 2011 to force a competitor out of the market.

In a statement, Qualcomm said that it “strongly disagrees” with the decision and that it would appeal the ruling to the European Union’s highest court.

“We are confident this agreement did not violate EU competition rules or adversely affect market competition or European consumers,” Don Rosenberg, Qualcomm’s general counsel, said in a news release. “We have a strong case for judicial review and we will immediately commence that process.”

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The fine on Wednesday comes with Qualcomm in the midst of multiple takeover battles. It has sought to fight off a hostile $105 billion takeover attempt by a rival, the Singapore-based chipmaker Broadcom. If completed, that takeover would be the largest technology deal in history. And despite that battle in the background, Qualcomm is still looking to complete a $38.5 billion acquisition of NXP Semiconductors.