A European court’s reversal of a landmark $1 billion antitrust penalty against Qualcomm — the second time the company has successfully appealed a ruling about the same anti-competitive behavior — has cast doubt on enforcers’ ability to make antitrust action stick, even while regulators worldwide are trying to tackle Big Tech with every tool available.
The European Commission ruled in 2018 that Qualcomm had violated EU antitrust law by paying Apple to use Qualcomm components, instead of competing products, in iPhones produced between 2011 and 2016. As part of that ruling, the commission imposed a €997 million fine on Qualcomm.
“Qualcomm illegally shut out rivals from the market for LTE baseband chipsets for over five years, thereby cementing its market dominance,” Margrethe Vestager, head of competition regulation for the European Commission, said at the time. “This meant that no rival could effectively challenge Qualcomm in this market, no matter how good their products were. Qualcomm's behavior denied consumers and other companies more choice and innovation.”
The EU General Court on Wednesday entirely annulled the commission’s ruling. The commission “committed a number of irregularities when it was putting together the case-file” on Qualcomm, the court said. Regulators also “failed to take account of all the relevant factual circumstances” of the case as it was filed, including that there was no competing product at the time that Apple could have sourced instead.
The FTC similarly filed an antitrust suit against Qualcomm in 2017, alleging the company violated competition law to strong-arm mobile device makers, and Apple in particular, into using its chips. “When Apple sought relief from Qualcomm’s excessive royalty burden, Qualcomm conditioned partial relief on Apple’s exclusive use of Qualcomm baseband processors from 2011 to 2016,” the agency wrote in its initial complaint (PDF). “Qualcomm’s exclusive supply arrangement with Apple denied other baseband processor suppliers the benefits of working with a particularly important cell phone manufacturer and hampered their development into effective competitors.”
A federal judge in 2019 ruled in favor of the FTC, finding that Qualcomm had used its patent to shake down mobile phone makers and block out competitors.
“Qualcomm’s licensing practices have strangled competition in the CDMA and premium LTE modem chip markets for years, and harmed rivals, OEMs, and end consumers in the process,” District Judge Lucy Koh wrote in her largely scathing opinion (PDF).
Over a year later, however, a federal appeals court tossed out that ruling. Although Qualcomm “possessed monopoly power in the CDMA modem chip market,” holding more than a 90% share, the company did not abuse its power, a Ninth Circuit panel said. Although Qualcomm’s behavior may have been disadvantageous to device-makers such as Apple, the appeals court ruled that the FTC failed to demonstrate that the company harmed its competitors in the chips market specifically. While the EU has been able to enact increasingly tight regulations on edge providers — internet services such as Facebook, Netflix, Google and Twitter that people use to get content from the internet — regulators have had a more difficult time with hardware companies.
Wednesday’s ruling, widely seen as a blow to Vestager’s competition agenda, lands as both U.S. and EU regulators are trying to push more-aggressive antitrust enforcement against technology companies. It also highlights the disparities between cases mounted against edge providers and those trying to take on makers of hardware and devices.
The General Court last year upheld an EU ruling — and its associated €2.4 billion fine — finding that Google had broken competition law by privileging its own content in searches for shopping services. That ruling was one of several the European Commission has issued against Google since 2017 relating to the company’s search, shopping and Android services, and the company has been ordered to pay more than €8 billion in aggregate fines in those cases.
European regulators have also been busy developing ambitious new rules for platforms that will fundamentally reshape the way some software and services have to work. The Digital Markets Act, which EU regulators revealed in March, focuses on “gatekeeper platforms” valued at more than €75 billion. Under the DMA, those companies will have to promote interoperability, allow competition with third-party app stores and payments systems, avoid self-preferencing and introduce more limits on how consumers’ data is used, among other provisions.
European regulators have said they hope the EU action also inspires similar change in the U.S., and it just might. There’s currently a significant amount of momentum behind bipartisan antitrust enforcement bills in Congress, although the time left on Capitol Hill to get anything accomplished is rapidly running out. The FTC, however, is also trying to flex its authority to crack down on harmful mergers and anti-competitive behaviors that reduce competition, suppress wages or harm consumers, especially with regards to privacy.
But as with Qualcomm, the world of enforcement against firms dealing in hardware is another story entirely, moving both more slowly and less surely. In January, the EU General Court once again tossed out a 2009 ruling that had fined Intel about €1 billion for abusing its market position in computer CPUs.
The FTC settled a similar claim with Intel in 2010, but no fines were mandated as part of that agreement. More recently, in November, chipmaker Broadcom also reached a settlement with the FTC over allegations it had unfairly leveraged its dominant market position. That settlement did not carry a fine either.