Qualcomm Inc (NASDAQ:QCOM) has been fined €997mln by the European Union for paying Apple Inc (NASDAQ:APPL) to solely use its chips in iPhones and iPads.
EU competition commissioner Margrethe Vestager said Qualcomm paid billions of US dollars to Apple so it would not buy chips 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,” Vestager said in a statement.
“This meant that no rival could effectively challenge Qualcomm in this market, no matter how good their products were.”
Qualcomm’s deal with Apple ran from 2011 to 2016.
The European Commission launched its investigation in 2015, taking into account Qualcomm’s market dominance in LTE baseband chipsets.
The Commission said the fine represented 4.9% of Qualcomm’s 2017 turnover.
The fine comes amid a long-running dispute between Qualcomm and Apple over patent licensing in several court cases around the world.
Apple claims that Qualcomm charges too much and is wrongly leveraging its strong position in the market.
Qualcomm alleges Apple has lied to regulators in an attempt to coerce it into charging less.
Qualcomm has also been trying to fend off a US$105mln hostile takeover by rival Broadcom Ltd (NASDAQ:AVGO). It rejected Broadcom’s bid last year, saying it undervalued the company and came with too much regulatory uncertainty.
Vestager said Apple was thinking of switching" from Qualcomm to Intel chips, which would have made a “big difference” to Intel.
She argued it would have cost Apple “a lot of money” if it switched chips while the deal with Qualcomm was in place.
Apple started to source from Intel when the agreement was about to expire in September 2016.
“The outcome is that rivals are prevented from challenging dominant companies with more innovative products," Vestager said.