Microsoft partner Qualcomm fined $1.2 billion for shutting out Intel

Qualcomm, who is currently under siege by Apple being accused of anti-competitive practices around 4G patents and who is the subject of a hostile takeover bid by Broadcom has just suffered another blow after the EU fined them $1.2 billion for buying Apple’s loyalty in 2011 and shutting Intel out of the iPhone modem market.

The 2011 deal offered Apple significant” sums and rebates if they only purchased Qualcomm’s chipsets.

“Apple was seriously thinking of switching” from Qualcomm to Intel chips “which would have made a big difference to Intel” but couldn’t do so until its Qualcomm pact was about to expire in September 2016, EU Competition Commissioner Margrethe Vestager told reporters at a Brussels press conference.

“This meant that no rival could effectively challenge Qualcomm in this market, no matter how good their products were,” Vestager said. “We’re talking about one of the biggest and most important customers in this market.”

“This is a huge fine by any standards and shows that Commissioner Vestager is starting 2018 very aggressively,” said Assimakis Komninos, a lawyer at White & Case in Brussels.

While Qualcomm appears to have relied on business dealings to lock in Apple’s business, they have also originated much of the technology used in 4G LTE standards, and their modems are objectively better than Intel’s offerings, such that Apple has had to throttle Qualcomm’s chips to maintain parity between Intel and Qualcomm-powered iPhones.

The fine is the EU’s 3rd largest and Qualcomm is of course appealing.

“Qualcomm strongly disagrees with the decision and will immediately appeal it to the General Court of the European Union,” the company said in a statement. The EU decision “does not relate to Qualcomm’s licensing business and has no impact on ongoing operations.”

Qualcomm is Microsoft’s major partner behind their Always Connected PC initiative, which envisions a new generation of laptops with 20-hour battery life, 1 week standby time and always-connected LTE.

Intel is also producing Always Connected PCs and Commissioner Vestager warns companies who are contemplating similar anti-competitive deals:  “Don’t go there.”

Read more detail at Bloomberg here.