EU Fines Qualcomm $1.23 Billion for Payments to Apple for Chip Exclusivity

By FeaturesDow Jones Newswires

Qualcomm Inc. was slapped with a EUR997 million ($1.23 billion) antitrust fine by the European Union on Wednesday for illegal payments it made to Apple Inc. for exclusively using its chips in smartphones and other products.

The EU said Qualcomm had abused its dominant position by paying billions of dollars to Apple from 2011 to 2016 on the condition it wouldn't buy from rivals, hindering other companies from competing in the market.

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"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," said EU antitrust chief Margrethe Vestager. "This meant that no rival could effectively challenge Qualcomm in this market, no matter how good their products were."

Qualcomm can appeal the EU's decision to the bloc's highest courts, though the company would still have to pay the fine and change any conduct while the court case plays out, a process that can take years.

The EU's move Wednesday, which follows a probe opened in 2015, fits into its broader strategy to boost and improve digital markets across the bloc's 28 member states. As part of that project, the European Commission, the bloc's executive, has pursued strict privacy rules, antitrust investigations and other rules in a bid to rein in the behavior of large U.S. tech companies.

The fine follows a decision last week by the EU regulator to clear Qualcomm's acquisition of NXP Semiconductors NV with conditions.

A separate EU antitrust investigation is ongoing over whether Qualcomm sold chips below cost to force a competitor, Icera Inc., out of the market.

The EU action is the latest in a string of bad news for Qualcomm.

The leading vendor of communications chips for smartphones in recent years has taken fire from regulators in several countries, all alleging that it wields its market dominance to overcharge customers and thwart competitors.

Qualcomm, based in San Diego, earns most of its profits from charging handset makers royalties for using its cellular patents. Most of the government investigations so far have focused on its licensing practices.

The Taiwanese government last year fined Qualcomm $773 million over its patent practices, after South Korea had imposed an $853 million fine the previous year. China fined Qualcomm $975 million in 2015. A suit by the U.S. Federal Trade Commission is pending. Qualcomm is also engaged in a legal battle with Apple following similar complaints from the iPhone maker, and the EU's decision Wednesday is likely to encourage Apple in that fight.

Qualcomm has contested these actions, saying they are based on misconceptions and flawed legal reasoning, and that its business practices are fair and legal.

The combined attacks depressed Qualcomm's stock price, paving the way for Broadcom Ltd.'s $105 billion hostile takeover bid last November. Qualcomm has so far rejected Broadcom's overture in what would be the biggest-ever tech deal.

Write to Natalia Drozdiak at natalia.drozdiak@wsj.com and Ted Greenwald at Ted.Greenwald@wsj.com

(END) Dow Jones Newswires

January 24, 2018 06:09 ET (11:09 GMT)

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