
Commission fines Qualcomm €997 million for abuse of dominant market position - rbanffy
http://europa.eu/rapid/press-release_IP-18-421_en.htm
======
Tehnix
I'm sorta glad the EU is taking this hard stance on antitrust, and actually
following up on a lot of these violations.

Side-note: As a Dane, so weird seeing Margrethe Vestager so prolific in this,
used to seeing her as one of the usual politicians.

~~~
teamhappy
The press release[1] says:

"The fine represents 4.9% of Qualcomm's turnover in 2017."

"In accordance with the Commission's 2006 Guidelines on fines (see press
release and MEMO) the fine has been calculated on the basis of the value of
Qualcomm's direct and indirect sales of LTE baseband chipset in the European
Economic Area (EEA). The duration of the infringement established in the
decision is five years, six months and 23 days."

Qualcomm made 122.5 billion in the last 5 years[2]. Making them pay 1% of that
for breaking the rules isn't what I would call "taking this hard stance on
antitrust".

[1]: [http://europa.eu/rapid/press-
release_IP-18-421_en.htm](http://europa.eu/rapid/press-
release_IP-18-421_en.htm) [2]:
[https://www.statista.com/statistics/737780/revenue-of-
qualco...](https://www.statista.com/statistics/737780/revenue-of-qualcomm/)

~~~
adwhit
White collar crime. It pays!

Shouldn’t the CEO go to jail? That might make them behave themselves, and
possibly go some way towards justifying their astronomical salaries.

~~~
xoa
> _Shouldn’t the CEO go to jail?_

No. While it's always tempting to bring out the torches and pitchforks and go
straight for the emotional response, please try to keep in mind that specifics
in law matters because it affects the rights of the regular person far more.
Criminal and Civil violations of the law are not the same thing for very good
reason, and that's not a matter of white collar vs blue collar or any other
color of collar. We want to discourage civil violations, but in general those
are things where the situation can be made whole purely through money. There
are no victims of non-reversible physical harm. Qualcomm's violation is not
the same thing as dumping carcinogens into a water supply or VW's pollution or
worker safety violations or cutting corners on life-safety product
requirements or whatever. It's not even clearly market damaging to the level
of situation's like Intel's actions vis-a-vis AMD. It's a violation and one
they should have caught, but at least mildly fuzzier, and the violation is
already over not ongoing. A sizable fine, investigations into more, and the
threat of larger ones in the future seems a genuinely reasonable response to a
situation like this absent continued patterns of bad behavior.

Seriously, we have _way_ too much criminalization of things that should be
civil violations already. There are certainly many times that people in power
get away with things that should be criminal and we should be trying to bring
them into line with what applies to everyone, but there are also a lot of
times where people in power get away with things that _shouldn 't_ be criminal
for everyone. In that case the common feeling of "bringing them down to our
level" is backwards, we should instead be working to bring the standards for
everyone else up. Both are equalization of advantage, but that doesn't make
them an equivalent end result. Prison is not something we should ever be in
the habit of reflexively resorting to.

~~~
rbranson
> Seriously, we have way too much criminalization of things that should be
> civil violations already.

Do you think that perhaps this has to do with the much larger pool of
resources put behind criminal prosecution vs civil?

------
weavie
Hypothetically, what would happen if Qualcomm refused to pay the fine?

They are an American company. Presumably all the executives live in America.
Could the EU put out an arrest warrant on them and hope the US extradites
them? Could the EU then refuse to allow Qualcomm to sell anything within the
EU? Would this mean Apple could then not sell any iPhones in the EU?

Just curious how such a scenario could pan out..

~~~
Aissen
You've had a few answers already.

They could start by adding a daily-fine for each day they don't pay the fine;
then interest on top. Then, you can imagine all smartphones with a Qualcomm
chipset suddenly being banned from a 510M+ people market. All companies in
Europe being barred from doing any business with Qualcomm; all Qualcomm IP
nullified in Europe. Imagine having any of your officials not being able to
travel inside Europe and cross-extradition countries, forever. The list goes
on.

~~~
ttoinou
That would be great. People would go to Andorra or Switzerland to buy their
smartphone ;)

~~~
detuur
Much more likely is that a Chinese manufacturer will rip off Qualcomm's IP for
"EU market only" phones. EU phones can still use Qualcomm technology but
without them ever seeing a dime for it until they pay their outstanding fines.
This is of course the situation driven to the extreme and "not paying market
regulator fines" is a line that probably only exists in the economics
handbooks of freemen-of-the-land type loonies.

------
rhn_mk1
I find it ironic that it's Intel losing out this time. Isn't it the same trick
they used against AMD in Athlon64 times?

Who fights by the sword, dies by the sword, I guess.

------
Jonnax
So reading this, Qualcomm straight up paid Apple to only use their products?

I have a limited understanding of how these agreements, but isn't that just
completely illegal?

How do you structure an agreement to be even a tiny bit plausible?

~~~
tooltalk
That's the narrative Apple told every regulators, but Qualcomm's is very
different.

According to Qualcomm's countersuit, Qualcomm did not demand that exclusivity
first. It was Apple who proposed "discount" or "rebates" in exchange for the
exclusivity and Qualcomm acquiesced to Apple's demand. Apple then turned
around started telling regulators all around the world that Apple was FORCED
to sign the exclusivity. Qualcomm was not allowed to directly counter Apple's
claims, unlike US lawsuits, and Qualcomm's only recourse was to withhold the
$1B rebate in breach of their business agreement -- their agreement forbids
Apple from giving false testimony about their contract to regulators. I'm
fairly sure that EU's findings are similar to those of China, Taiwan and
Korea.

Qualcomm's anti-competitive baseband licensing was well known before and I
think Qualcomm got dinged for the right reason. But Apple's claims are
directly countered by Qualcomm and, given Apple's past problem with GTA and
other suppliers and unless there are other victims of Qualcomm's "exclusivity"
agreement -- I'm inclined to believe Qualcomm was tricked by Apple's clever
lawyers.

~~~
joncrane
How does it help Apple to have Qualcomm go down, though?

~~~
tooltalk
Apple's interest here is the patent licensing policy change.

Apple has been losing legal battles against wireless patent holders for as
long as the iPhones have been around. In their quest to squeeze their wireless
suppliers (Nokia, Ericsson, Qualcomm, etc...), Apple has challenged their
licensing practices -- ie, royalty rates and basis -- every time their
licensing contract was up for renewal, claiming that their licensing practices
are in breach of FRAND. Of course, Apple never had any evidence of such
violation and lost or settled every lawsuit.

Now that it's evident that they can't win in courts, they are trying to
convince policy makers/regulators to do it for them. It helps Apple's cause
mightily when their largest patent holder is found in violation of anti-
trust/competition laws and, contrast to their past policy of letting the
market work things out, now Apple's friends in DC and FTC have to implement
draconian licensing policies in favor of Apple to better control abuses in
wireless patent licensing.

------
lukejduncan
I’m not sure I understand how this is a bribe. I think of a bribe as an
individual personally taking a cut or kick back to influence the decisions of
an organization. Two organizations agreeing to buy from each other exclusively
for some period of time sounds like... a contract. If the agreement came in
the form of bulk pricing instead of a balloon payment would it make a
difference to the court? How is that functionally different from what
happened?

~~~
mikevin
Bulk pricing can be competitive but at least there's options for competitors.
With this deal there's nothing competition can do to compete.

But yes, it's difficult to define a hard line. I think the fact that this was
a real deal and not just loyalty plays a part.

------
jcrei
What does that say about Apple that it accepted the deal? Are they subject to
any fine for their behavior?

~~~
tooltalk
It was Apple who proposed the rebates in exchange for exclusivity. Qualcomm
acquiesced to Apple's demand. Apple then turned around told every regulators
that Apple was FORCED into that exclusivity.

------
dschuetz
This is especially interesting, because I remember that the Intel chipsets in
iPhones and iPads have had problems in LTE performance comparisons. So, Intel
was losing to their competitor some time anyway, but still Qualcomm somehow
needed to oil their marker shares growth. Why such aggressive competition?

~~~
tooltalk
maybe the reason the narrative doesn't make sense is because it doesn't..

Qualcomm never had opportunity to counter Apple's claim before -- and I'm
fairly sure Qualcomm was not allow to directly counter Apple's claim here
either.

So what really happened, according to Qualcomm's lawsuit in US, was that Apple
first drafted their business agreement with discount "rebates" with the
exclusivity. Qualcomm simply acquiesced to Apple's demand, being that Apple
was a huge volume customers and in the driver's seat. Remember Apple was never
in rush to implement the latest or the best tech and had used Infineon chips
previously. Qualcomm probably knew that they were so far ahead that they
didn't have to be so aggressive, but Apple was still a huge volume customer.
So after agreeing to the terms, Apple started parading around, orchestrating
regulatory actions against Qualcomm claiming that Apple was forced into that
exclusivity that would handicaps Qualcomm's competitors.

I'm inclined to believe at this point, considering Apple's problem with GTA
and past lawsuits with other wireless providers where they often came up with
fictitious or groundless accusations, it was Apple's clever lawyering at work.

------
0xFFC
The main question is why US does not fine Qualcomm over such fiasco? This is
anti-competitive behavior from Qualcomm. what ridiculous market would we have
if this kind of behavior would continue.

~~~
totalZero
First, there are two sides to every story. And QCOM is already facing
regulatory heat in the USA.

Second, QCOM has already been fined similar amounts for similar behavior in
China and Korea. Any regulatory action by the USA has to keep in mind the
ramifications of subsequent such action by foreign governments. That is to
say, there is an economic incentive to let QCOM keep bullying manufacturers,
because they are a US company in a largely international market.

Personally I think AVGO is nuts for wanting to buy this company. Without their
bullying behavior in the licensing sphere, QCOM would be worth a fraction of
its current price. They are majorly vulnerable here -- take a look at any
regulatory filing from the past few years and you'll see that the lion's share
of their profit comes from licensing.

------
JustSomeNobody
I'm trying to figure out if I feel Apple was in the wrong also. On the one
hand they seem complicit in keeping other LTE vendors down. But on the other
hand, why would you _not_ take the deal? Someone is supplying you all the LTE
chips you need and a bucket of cash. That's good for business.

~~~
tpush
> But on the other hand, why would you not take the deal?

Because it's literally and trivially illegal?

~~~
JustSomeNobody
Then why isn't Apple getting fined? Has it just not been announced, maybe?

~~~
idbehold
I'm guessing it's because purchasing good/services from a company abusing its
dominant market position isn't illegal.

------
getpost
I thought Apple and Qualcomm weren't getting along. I wish I understood what
was going on. It's a big charade?

A year ago: Apple sues Qualcomm for roughly $1 billion over royalties
[https://www.cnbc.com/2017/01/20/apple-sues-qualcomm-
for-1-bi...](https://www.cnbc.com/2017/01/20/apple-sues-qualcomm-
for-1-billion.html)

~~~
mercutio2
Perhaps you’re missing that this is an EU fine for _past behavior_ , so the
timelines work perfectly?

The exclusivity agreement expired in 2016. The fine is for that period. Since
exclusivity ended, Apple has been trying to buy baseband chips from other
suppliers without paying Qualcomm’s allegedly non-FRAND patent terms.

------
rasz
Small reminder: Both Intel and Microsoft haven't paid a single Euro of their
previous record ~1B antitrust fines yet.

Not to mention Intel also hasnt yet paid AMD >$1B restitutions for directly
bribing distributors and system integrators to drop its competitor from
inventory.

------
lunchables
How big is this fine relative to the size of the market for their LTE modems?
If they could do it over, would they do the same thing?

My understanding is Qualcomm is kind of the undisputed leader with Intel
trying to play catch up.

------
goutham2688
Is there similar laws in US as well? if they have done this in EU it might
have happened in US too.

~~~
grigjd3
I'd be very surprised to see such a fine in the US.

~~~
tjalfi
The US used to have fairly strong antitrust enforcement.

Here is an excerpt from [0].

"To get a flavor of how thoroughly the federal government managed competition
throughout the economy in the 1960s, consider the case of Brown Shoe Co., Inc.
v. United States, in which the Supreme Court blocked a merger that would have
given a single distributor a mere 2 percent share of the national shoe
market."

[0] [http://washingtonmonthly.com/magazine/novdec-2015/bloom-
and-...](http://washingtonmonthly.com/magazine/novdec-2015/bloom-and-bust/)

------
simula67
Exclusive deals are anti-competitive ? Would Microsoft be fined for reaching
an exclusive agreement with Nokia to sell their only Windows Phones ? Would
Google be forced to make and sell Windows phones ? I thought violating anti-
competitive laws required one party to cross-subsidize, use advantages in one
field/area to drive out competition in another

~~~
rowyourboat
There is no such requirement in EU anti-trust law. Any deal that restricts the
freedom of contract with a third party is illegal.

------
abiox
what happens to this fine money? does it count as revenue?

~~~
phaemon
It goes into the EU budget, but since the 2017 budget was €158 billion, even
the largest fines are fairly insignificant.

------
agumonkey
I wonder where these fine get used, if at all.

------
nolok
Make sure to read the article, not just the title. They're not being fined
because they're dominant, they're fined for anti-competitive behavior (aka
bribe).

> Qualcomm [the market leader at the time of events] illegally shut out rivals
> from the market for LTE baseband chipsets for over five years [...] Qualcomm
> paid billions of US 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. [...] This is illegal under
> EU antitrust rules and why we have taken today’s decision.”

~~~
maaaats
Should Apple also be fined for accepting the bribe? (Curious about legal
standing as well as what people here feel)

~~~
Aaargh20318
According to some other reports, Apple accepting the bribe does not violate
any antitrust rules. (Can't find an english-language source for that
unfortunately)

~~~
nothrabannosir
For the record: which reports? Regardless of language…

~~~
Aaargh20318
This one for example: [https://tweakers.net/nieuws/134381/eu-legt-qualcomm-
boete-op...](https://tweakers.net/nieuws/134381/eu-legt-qualcomm-boete-op-van-
bijna-een-miljard-euro-voor-misbruik-machtspositie.html)

Quote: “Volgens Vestager treft Apple in dit dossier geen blaam; er zou geen
bewijs zijn dat Apple de Europese mededingingsregels heeft overtreden.“

Translation: “According to Vestager Apple is not blamed in this case; there
seems to be no evidence Apple violated the European antitrust rules”

------
blattimwind
I'd say it would be good if the mods changed the submission title to something
like "EU fines Qualcomm $1.2B over antitrust violations" or "Qualcomm fined
$1.2B for violating EU antitrust regulations", since the article's title is
almost egregiously wrong.

~~~
antr
the mods should link to the Europen Commission website... not Techcrunch,
which is a low-quality copy & paste: [http://europa.eu/rapid/press-
release_IP-18-421_en.htm](http://europa.eu/rapid/press-
release_IP-18-421_en.htm)

~~~
peteey
The mods should not do anything. The title of the post closely resembles the
title of the article.

~~~
anyfoo
The mods on HN frequently editorialize submission titles if it makes the title
more sensible, even if that means deviating from the original headline (which
does not need to be the submission title in the first place). A good practice
in my mind.

------
antr
Link to the article's source: [http://europa.eu/rapid/press-
release_IP-18-421_en.htm](http://europa.eu/rapid/press-
release_IP-18-421_en.htm)

------
JackNichelson
Fined because of a discount, a private deal. I hope every statist supporting
this gets fined 5% of their income one day because of something they did in
private, and hopefully it'll be utterly painful for them and their families.
Maybe then they'll learn.

~~~
pwinnski
Publicly-traded companies doing business in markets all around the world
cannot really be said to be making a private deal.

The fine isn't because of a discount, it's because of a clawback clause that
is punitively anti-competitive and completely illegal.

They will still have earned more from making the illegal deal than this
penalty will cost them.

Three strikes.

------
wtfstatists
When calculating fine why does EU considers global revenue rather than from EU
?

Nations are supposed to respect each others decisions. Both are USA companies
and USA is ok with this practice, why does EU disrespect USA's stance ?

~~~
detaro
Fines _are_ based on business made in the european market.

~~~
wtfstatists
Ah yes I misunderstood from " _The fine represents 4.9% of Qualcomm 's
turnover in 2017._" as mentioned in the official press release.

I know its offtopic, but GDPR calculates based on global revenue.

------
amelius
Meanwhile, Apple continues its vertical integration of smartphone components.
Speaking of dominance ...

~~~
nolok
Nothing to do with the case at hand. Qualcomm, the market leader, paid what
can only be called a bribe to Apple in exchange for Apple guarantee that they
would not buy chips from qualcomm's competitor in any of their product,
denying competition, and going against EU's law.

If you think a manufacturer should not be able to make its own hardware parts
that's your opinion and you're entitled to have it, but it's a completly
different issue.

~~~
sgc
> what can only be called a bribe

Well it _could_ be called extortion. Apple could well have initiated the
conversation, or placed such financial pressure on Qualcomm in terms of price
reductions that they considered this was the only financially stable way of
giving them what they want. It's not like Qualcomm could bully Apple into much
of anything. If push came to shove that would just result in a hostile
takeover.

In the end Qualcomm failed with faulty lawyering, as there should have been a
carveout for the EU, and none of this would have mattered.

Please note: I am not saying it was extortion, just that there is a case that
needs to be made to rule that out since the players are not unsophisticated. I
think it is ridiculous that a company as large and well-informed as Apple gets
a total pass when they obviously benefited significantly from the deal (or
_they_ would not have made it). It also seems a bit myopic to see every large
company with sector dominance as in a position of power and therefore as the
aggressor. There should be codification for market-dominant consumers as well.

