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EU fines Qualcomm $1.2 billion for paying Apple to use its microchips

EU fines Qualcomm $1.2 billion for paying Apple to use its microchips
EU Commissioner for Competition Margrethe Vestager speaks at a news conference on the Qualcomm case Jan. 24. (Olivier Hoslet / EPA/Shutterstock)

The European Union is slapping a $1.23-billion fine on U.S. chipmaker Qualcomm for abusing its market dominance in the lucrative sector of components in smartphones and tablets.

EU Commissioner Margrethe Vestager said Wednesday that San Diego-based Qualcomm "illegally shut out rivals from the market" for more than five years by paying key customer Apple to not use chips made by Qualcomm's rivals.

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Vestager said Qualcomm paid "billions of dollars" to Apple.

She said the payments were made in part by reducing prices for Apple to buy Qualcomm components on condition that Apple iPhones and iPads would exclusively use Qualcomm chips.

The EU said that the abuse happened between 2011 and 2016 and centered on baseband chipsets that allow smartphones and tablets to connect to cellular networks. Over most of that period, Qualcomm accounted for over 90% of the market.

Apple was a dominant player with its iPad and iPhones, and the two companies twice entered an agreement to cut out rivals.

Vestager said there were no regulatory repercussions for Apple despite accepting the system for the best part of six years.

She said she had internal documents showing Apple considered switching some of its work to Intel but could not do so financially until the end of the agreement.

Only when the deal was about to expire did Apple start to diversify. "Competition in this market is now on the up," Vestager said.

In a warning to others, Vestager said "don't go there." The fine of 997 million euros is meant to be a deterrent.

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