Qualcomm Is Said to Face EU Antitrust Rebuke for Apple Payments

(Bloomberg) -- Qualcomm Inc. is likely to be penalized in the coming weeks by the European Union for paying Apple Inc. to shun rival chip companies, according to a person familiar with the case.

Regulators are set to find the company violated antitrust law by using incentive payments to ensure exclusivity, the person said, asking not to be cited by name because the investigation is ongoing. EU officials have been studying a September ruling involving Intel Corp. that raised similar issues and could issue findings on Qualcomm as soon as next month, according to the person. The person didn’t discuss a potential fine, which is widely expected.

Qualcomm is already fighting with Apple in numerous court cases around the world over patent licensing. Apple has also been making moves to develop iPhones and iPads without Qualcomm components. The San Diego-based company is separately trying to ward off a proposed takeover by Broadcom Ltd.

Apple says Qualcomm charges too much and is leveraging its strong market position in chips illegally. Qualcomm counters that Apple, one of its largest customers, has lied to regulators in an unfair attempt to bully it into charging less.

Qualcomm and the European Commission, the EU’s antitrust arm, declined to comment. Apple had no immediate comment.

Apple’s Incentives

The EU previously said Qualcomm’s payments to a smartphone manufacturer it didn’t name were harmful to competition because they reduced incentives to source chips elsewhere and may have limited innovation for so-called UMTS and LTE baseband chipsets.

The case has some parallels with the EU’s 2009 finding that Intel’s rebates to computer manufacturers and payments to a retailer were aimed at squeezing out a smaller chipmaker. The EU’s top court has ordered a lower tribunal to reexamine Intel’s appeal and weigh whether the EU can merely assume that such tactics are illegal without proving they were harmful to rivals and competition.

A negative decision would be the first time the EU has finalized an investigation into Qualcomm. Officials dropped a four-year probe in 2009 into how it licensed patents used in the 3G phone standard. There was no fine or any finding that Qualcomm violated antitrust rules in that case.

A second EU probe, still underway, centers on whether Qualcomm deliberately sold chipsets for internet dongles at below-cost from 2009 to 2011 to hinder competitor Icera, now owned by Nvidia Inc. That case has escalated with a court dispute over information the EU sought from the company. Qualcomm was threatened with additional daily fines for not quickly supplying data the EU wanted.

--With assistance from Ian King

To contact the reporters on this story: Stephanie Bodoni in Luxembourg at sbodoni@bloomberg.net, Aoife White in Brussels at awhite62@bloomberg.net.

To contact the editors responsible for this story: Anthony Aarons at aaarons@bloomberg.net, Peter Chapman, Molly Schuetz

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