General Court annuls 2018 European Commission fine on Qualcomm

The General Court has observed that several procedural irregularities affected Qualcomm’s rights of defence and invalidate the Commission’s analysis of the conduct alleged against Qualcomm,

The General Court has issued its ruling in Case T-235/18. Qualcomm is a US company which develops and supplies baseband chipsets intended for use in smartphones and tablets to enable them to connect to cellular networks and are used both for voice services and data transmission. Chipsets are sold to original equipment manufacturers, including Apple, who incorporate them into their devices.

In 2018, the Commission imposed on Qualcomm a fine of close to €1 billion for abuse of dominance on the worldwide market for chipsets compatible with the Long Term Evolution (LTE) standard. 

According to the Commission, that abuse was characterised by the existence of agreements providing for incentive payments, under which Apple had to obtain its requirements for LTE chipsets exclusively from Qualcomm. In those circumstances, the Commission took the view that those payments, which it characterised as exclusivity payments, could have anti-competitive effects, because they had reduced Apple’s incentives to switch to competing LTE chipset providers.

The General Court decision

The General Court has annulled the Commission decision in its entirety. The General Court based its conclusions on:

(a) the finding of several procedural irregularities which affected Qualcomm’s rights of defence, and

(b) an analysis of the anticompetitive effects of the incentive payments. 

Qualcomm’s rights of defence

The General Court has found that the Commission committed a number of irregularities when it was putting together the case-file. The General Court points out that it is for the Commission to record, in the form of its choosing, the precise content of all interviews conducted to collect information relating to an investigation. In this case, the Commission failed to keep proper records about meetings and conference calls with third parties.

In addition, the General Court observed that the contested decision limited itself to finding abuse of dominant position on the market for LTE chipsets alone. However, the statement of objections concerned abuse both on that market and on the market for UMTS (Universal Mobile Telecommunications System) chipsets. The General Court considered that, to the extent that modification of the objections affected the relevance of the data which formed the basis of Qualcomm’s economic analysis seeking to challenge the capability of its conduct to have foreclosure effects, the Commission ought to have given Qualcomm the opportunity to be heard, and, where necessary, to adapt its analysis. 

Therefore, by failing to have heard the undertaking in relation to that point, the General Court finds that the Commission infringed Qualcomm’s rights of defence.

Were the payments capable of having anti-competitive effects?

The General Court has found that when the Commission concluded that the payments could restrict competition for all of Apple’s LTE chipset demand for iPhones and iPads, the it failed to take account of all the relevant factual circumstances. The General Court said that although the Commission concluded that the incentive payments had reduced Apple’s incentives to switch to competing suppliers to source LTE chipsets, it was apparent from the Commission decision that Apple had had no technical alternative to Qualcomm’s LTE chipsets for the majority of its requirements for iPhones. Therefore, the General Court concluded that the Commission’s analysis was not carried out in the light of all the relevant factual circumstances and that it was unlawful.

In addition, the General Court has ruled that the conclusion that the payments at issue had actually reduced Apple’s incentives to switch to Qualcomm’s competitors to obtain supplies of LTE chipsets for certain iPad models to be launched in 2014 and 2015, was not sufficient to determine that they were anticompetitive for all of Apple’s requirements. A specific analysis of that nature could not remedy the failure to consider all the relevant factual circumstances in the Commission’s general demonstration of the capability of the payments at issue to have anticompetitive effects during the period concerned in relation to all of Apple’s LTE chipset requirements for iPhones and iPads. In addition, the General Court said that, in any event, the Commission did not provide an analysis which supported the findings that the payments concerned had actually reduced Apple’s incentives to switch to Qualcomm’s competitors to obtain supplies of LTE chipsets for certain iPad models to be launched in 2014 and 2015.

Published: 2022-06-17T16:00:00

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