Qualcomm Fined $1.2 Billion by European Union Over Chip Deals

European Union antitrust regulators have handed down a €997 million or $1.23 billion fine to chipmaker Qualcomm, a U.S. based company. The fine, announced on Wednesday, is for paying Apple so the maker of iPhones would only use its chips and block rivals like Intel.

The European Commission announced that its investigation, which began in 2015, had covered between 2011 and 2016 and took into account the market dominance of Qualcomm in baseband chipsets, which allow for rapid mobile connections across 4G.

Qualcomm, said Margrethe Vestager the Competition Commissioner at the EC, paid billions in U.S. dollars to an important client, Apple, so it would not purchase from Qualcomm’s rivals. The payments were not only in the form of price reductions, but were with the condition Apple would use the baseband chipset of Qualcomm exclusively in its iPhones as well as iPads, added Vestager.

She said that the agreement meant no rival could challenge Qualcomm in an effective manner in the market, regardless of how good of products they were offering.

The fine equals 4.9% of the 2017 turnover of Qualcomm, said the commission.

Qualcomm and Apple are in a legal battle over the business practices of Qualcomm, which started last year, when Apple sued Qualcomm for $1 billion in royalty rebates for patents that the chipmaker has been alleged to have withheld from the Cupertino, California tech giant.

Other regulators, such as the Federal Trade Commission, have been conducting investigations into the deals of Qualcomm with Apple. The decision by the EU could put Qualcomm into a more vulnerable position to Broadcom in the chipmaker’s hostile bid of $103 billion to take it over.

Broadcom says it can smooth the rocky relationship Qualcomm has with customers like Apple.

The competition enforcer for the EU is believed to be readying another ruling against Qualcomm in the upcoming few months in a case that involves Icera the maker of phone software based in Britain that later was acquired by Nvidia, said a person close to that matter with the EC.

In that case, the EC has accused Qualcomm of selling its chipsets at below cost in an attempt to drive Icera out of the market, a practice referred to as predatory pricing.

No comment was received from Qualcomm related to the Wednesday ruling by the European Commission even after several messages were left requesting one.

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