Qualcomm allegedly paid billions of U.S. dollars to Apple in order to influence the device maker against buying chipsets from rivals including Intel. Qualcomm offered reductions in chipset price to Apple – on the condition that Apple would exclusively use Qualcomm’s baseband chipsets in all its iPhones and iPads. It is not clear whether Qualcomm paid bribe to Apple officials to influence the purchase.
Reuters reports that the EU decision could make Qualcomm vulnerable to Broadcom’s $103 billion hostile bid, since Broadcom argues it can smooth rocky relations with customers such as Apple. Broadcom is in the process of seeking a new board at the troubled chipset company.
Despite levying fines, EU antitrust regulators recently cleared Qualcomm’s $38 billion bid to buy NXP Semiconductors. Chinese regulators still need to approve the deal, and some NXP shareholders want a higher price.
Qualcomm said the decision from the European Commission (EC) was relating to an expired agreement between Qualcomm and Apple Inc., which was in effect from 2011 through 2016, for the pricing of modem chips.
Qualcomm is one of the leading modem chips suppliers to Apple. Apple has also taken Qualcomm to several courts in other related license issues.
The EC alleges that certain provisions of this agreement were in violation of European Union competition law. Qualcomm did not reveal further information on the modem chips contract with Apple.
Qualcomm said it strongly disagrees with the decision and will appeal it to the General Court of the European Union. The EC decision does not relate to Qualcomm’s licensing business and has no impact on ongoing operations.
“We are confident this agreement did not violate EU competition rules or adversely affect market competition or European consumers,” said Don Rosenberg, executive vice president and general counsel of Qualcomm.
The European Commission said its investigation considered Qualcomm’s market dominance in LTE baseband chipsets for broadband connections.
“Qualcomm paid billions of U.S. dollars to a key customer, Apple, so that it would not buy from rivals. 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,” European Competition Commissioner Margrethe Vestager said in a statement.
The fine represented 4.9 percent of Qualcomm’s 2017 turnover. The fine will impact the net profit of Qualcomm.
Qualcomm is required to post a bond for the fine while the appeal unfolds, which will likely result in a charge for the current quarter. When hit with fines in the past, such as $774 million levy last year from Taiwanese regulators, Qualcomm took a charge as it appealed.
Apple and Qualcomm are locked in a legal battle over Qualcomm’s business practices, which started a year ago with Apple suing Qualcomm for nearly $1 billion in patent royalty rebates that the chipmaker allegedly withheld from the phone maker.
Other regulators, including U.S. Federal Trade Commission, are investigating Qualcomm’s dealings with Apple.
In addition, the EU competition enforcer is expected to rule against Qualcomm in another case involving British phone software maker Icera, which was acquired by Nvidia, In that case, Qualcomm is accused of selling chipsets below cost to drive out Icera.