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EU Fines Qualcomm $1.2 Billion for Paying Apple To Use Its Microchips ( 112

The European Union on Wednesday slapped 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 for half a decade. From a report: EU Commissioner Margrethe Vestager said 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. Vestager said Qualcomm paid "billions of dollars" to Apple and in the process helped establish itself as the dominant force.
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EU Fines Qualcomm $1.2 Billion for Paying Apple To Use Its Microchips

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  • by JoeyRox ( 2711699 ) on Wednesday January 24, 2018 @11:28AM (#55992841)
    It was in Qualcomm's interest to pay Apple billions because it obviously served to discourage the development of a competing designs by Qualcomm's competitors.

    But it also served Apple's interests because getting such good terms meant they would get a parts-cost advantage vs all their smartphone competitors while at the same time assuring those competitors would not have a lower-cost alternative available to them from a Qualcomm competitor.

    Monopolistic synergy.
    • by PPH ( 736903 )

      They just had bad attorneys writing up the agreement. It should be something along the lines of a 'volume discount'. Where the the volume needed for terms to kick in are defines as 100% of a customer's business.

      • Where the the volume needed for terms to kick in are defines as 100% of a customer's business.

        That would be illegal. A few twisted words do not make illegal actions acceptable.

        The correct way to do this is to have no written agreement, just a wink and a handshake.

    • But it also served Apple's interests....

      Yes, so I eagerly await the $1.2B fine against Apple for participating in the plot.

      • by Zocalo ( 252965 )
        Quite. Every single company ethics training course I have ever done in the EU makes it very clear that both offering *and* accepting a bribe is a huge no-no and that both can carry some very severe penalties if you are caught. Depending on the circumstances, those penalties currently include things like large fines, jail time and forfeiture of any assets paid for using a bribe (including your home) for the individuals involved, plus their employer being barred from government contracts if they were found
    • It's a strange way of say that apple paid less than the full amount. Perhaps there is something in european law that forbids a discount to a customer, making the mechanism of giving a discount to a customer illegal. But surely, discounting for a large customer is in general legal???

      I could imagine some possible conditions that might matter. Qualcom owns many of the standards it's parts implement. In come cases it licences those via FRAND rules in return for the adoption of proprietary methods as the sta

      • by JoeyRox ( 2711699 ) on Wednesday January 24, 2018 @12:50PM (#55993413)
        Qualcomm's provision for exclusivity in exchange for the discount is what is anti-competitive, not the discount itself.
        • why is that anti-competitive? could other's not offer similar discounts for loyatly too? that is price competition.

          • It is about size, Qualcom dominates the market therefore it is bound not to operate in an anti-competitive way that blocks smaller players from entering the market.

            Just like if two small business merge no one cares. However if 2 large companies merge, say google and apple then they would require government approval.

      • by Agripa ( 139780 )

        It's a strange way of say that apple paid less than the full amount. Perhaps there is something in european law that forbids a discount to a customer, making the mechanism of giving a discount to a customer illegal. But surely, discounting for a large customer is in general legal???

        Volume or other discounts are not unlawful but tying them to not using your competitor's products is if you have a dominant market position. This is what Intel did to AMD when they were producing the Pentium4 and AMD introduced the better performing Athlon64. Intel ordered its customers not to use AMD's products.

  • Is that illegal? (Score:3, Insightful)

    by Oswald McWeany ( 2428506 ) on Wednesday January 24, 2018 @11:29AM (#55992851)

    Is it illegal to "pay to play"? How is Qualcomm paying to be an exclusive provider not just a contract agreement of service? I thought this happens in a lot of industries. How is it different to offering a bulk-discount if you buy x million chips from us? (essentially doing the same thing)

    I know some grocery stores accept money from companies to guarantee certain shelf-space; for example.

    If Qualcomm had paid to guarantee they be used for just 99% of chips supplied would that still be illegal (obviously Apple would just get all from them in that case, because wouldn't make sense to change hardware to allow a second chip for 1% of products).

    • Re:Is that illegal? (Score:5, Informative)

      by Gaxx ( 76064 ) on Wednesday January 24, 2018 @11:42AM (#55992919)

      The key, I believe, is that there was an exclusivity clause in the contract. The EU are very wary of such things (with good reason if you believe that monopolizing practices are harmful).

      Now - had the contract been that they would sell X number of chips for a given prices then I suspect that there wouldn't have been a case - whether that X amounted to 100%, 99% or 150% of what Apple used. The problem was that the agreement they reached excluded other manufacturers.

      Exclusivity contracts are one of those things that fall into a bit of a market freedom paradox. In a truly free market then they should be possible (because you can sign a contract for anything, right?) but in being available they curtail market freedom once in place.

      As a proponent of market freedom (or control) you can fall either side on whether they are a good or bad thing.

      • I understand the concern here. Is it different though to say...

        In 007, Die another Day, every car used in the film had to be a Ford or a Ford subsidiary because Ford paid them. Or when Coke or Pepsi make an agreement with a restaurant chain to be their only provider. Or when an event provider agrees to only employ people from a certain staffing agency. Sure, Restaurant X could start buying Pepsi but then face a financial penalty. On the same token Apple COULD start buying Intel, but then face the wrat

        • The difference will be buried in the details. For example from experience in the restaurant, there is no financial exclusivity deal. What there is is a breach of contract deal. You're more than welcome to start stocking Pepsi. But Coke will not let you put it in their fridge (those fridges are leased by the way), and will very likely terminate the contract with you causing quite a bit of grief. This is very different from "here's money, don't buy anything from Pepsi"

          The other big difference is that exclusiv

          • Actually most German 'pubs' have franchise like contracts regarding drinks.
            E.g. bars that serve Fritz Cola will onnly serve that, and no other Cola.
            And as Frizt also sells many fruit juices, the contracts usually forbid you to have any product on menu from a different brand, when you could get it from Fritz. E.g. Orange Soda (Orangensaftschorle).

            • Agreed. But Frizt being the underdog is unable to abuse a dominant market position. It's a strange dichotomy where what is illegal for one may not be illegal for another.

              • Exclusive contracts would not be illegal for anyone.
                The article is about 'bribing' Apple, by spending extra money money to Apple.

                • Exclusive contracts would not be illegal for anyone.

                  Except they become illegal as soon as it is done as an abuse of market position. Lookup "anti-trust laws". A lot of non-illegal things can suddenly be illegal. Even deciding to sell a product at a loss can be illegal without ever actually involving a third party.

        • In 007, Die another Day, every car used in the film had to be a Ford or a Ford subsidiary because Ford paid them.

          Ford isn't a dominant player in the market, also the contract was for ONE movie only.
          If Ford would have owned 80% of the car market and signed a contract that said "all 007 movies from now to Kingdom Come would only feature Ford cars" - that would have been ruled illegal.

          Or when Coke or Pepsi make an agreement with a restaurant chain to be their only provider.

          Coke and a restaurant chain of 10 locations could have this agreement. Coke and McDonald's couldn't.
          We're talking about two dominant players agreeing to stop competition.

          • But coke and McDonald's have exactly that agreement.

            • Sure. Coke doesn't dominate the soft drink industry. McDonald's, while a large part of the soft drink market, isn't dominant either. Burger King is of comparable importance and has a contract with Pepsi. There's a large market out there, including some vending machines in our building. So, nobody cares. Another company could enter the soft drink field and compete in various ways.

              However, if Coke was the dominant supplier, we'd want other companies to have the ability to supplant its position. Perm

              • Sorry,
                Joe can't because McDonalds and Coke went into a mutual agreement.
                That has nothing to do with the /. article, nor if either of them dominates the market.
                No one prevents Joe from selling in the next best super market, via Amazzon, or what ever.

                So, it's all about whether Joe gets a fair shake in the market or not.
                And how does an excclusive deal betwenn C and M prevent that? M is not the market ... it is only one company/partner/customer in the market.

      • by Dog-Cow ( 21281 )

        Since when is a manufacturer choosing a single supplier for a part considered monopoly behavior? Qualcomm was free to sell to others, and others were free to buy from Qualcomm's competitors.

      • Did it have anything to do with abuse of monopoly position? There are loads of exclusivity clauses across all manner of product lines, but no one cares if a small company manufacturing purses is selling them exclusively through a single chain of stores. Qualcomm may be a big enough player in that space to constitute a monopoly and therefor face restrictions in the kinds of actions they can engage in.

        The problem with your paradox is that you haven't considered the other end of the argument. If you can't r
        • by Gaxx ( 76064 )

          Ah yes. Sorry - I was kind of assuming the dominant position without stating it.

          So let me elucidate a little further with that made (hopefully) clearer. Qualcomm was in a market-dominant position at the time and cut an exclusivity deal with Apple that pretty much guaranteed that they would remain in a fairly dominant position as a result. It's not a _complete_ monopoly unless they managed to get a similar deal with other manufacturers but certainly significant enough to make it far less likely that anyon

    • by Anonymous Coward

      Because that's the law. Offering a volume discount for a specific large number of chips is entirely legal. Offering a volume discount for 100% of the business from one large company to the effect that it shuts out all other suppliers is anti-competitive and illegal.

      Some grocery stores do indeed accept money to guarantee certain shelf space - that's entirely legal. Paying to guarantee that a competitor does not get *any* shelf space anywhere, is not.

    • Is it illegal to "pay to play"?

      No. It's illegal to abuse a position of a monopoly. Depending on your current market situation, who you're doing business with and who it affects, all of the things you listed can be considered illegal for the same reason.

  • Nice bribe (Score:2, Interesting)

    by Quakeulf ( 2650167 )
    If this lump sum of money isn't going to help the others in the tech industry it's just a bribe for them to keep doing what they're already doing.
    • by AmiMoJo ( 196126 ) <> on Wednesday January 24, 2018 @11:56AM (#55992999) Homepage Journal

      Except that they are not allowed to continue doing it. If they do, there will be another bigger fine, and so on util they go bankrupt or stop.

      • by Anonymous Coward

        People who claim that EU just is trying to get free money tends to ignore that fines like this often comes with a warning first.

        The goal isn't to fine them. The goal is to make them stop.
        The fine is just a method to accomplish the goal.
        If it doesn't help you either increase the fine or throw them in jail.

        Many times the fines aren't large enough and the company just sees it as the cost of doing business.
        The correct response isn't to fine them again with the same amount.
        In a situation like that you need to sh

        • They're not going to stop until the relevant people are in jail.
          • ...or all the money changed pockets. Whichever comes first.
            I personally would rather see them broke than in jail for a couple years then back out, just as rich as they went in.

      • Where is the money stored? In a bank.

        What do banks do? Give loans.

        Who gets a loan? Apple.

        Who bails out the banks after they go bankrupt from lending? The Government.
  • Throwing the asshole executives (all of them in big companies) who only see short term profits in jail for at least 20 years is better. Let's be real, it's not gonna be the upper management who pays for this, but the lower ranks.
  • Patents? (Score:3, Interesting)

    by Anonymous Coward on Wednesday January 24, 2018 @11:50AM (#55992973)

    Qualcomm will just file this under their expenses along with costs of labour, real estate, vendors and all other business expenses.

    Their market position they gained from this behaviour is worth far more than 1.2 billion in the long run.

    They should be forced to relinquish their patents in order to allow real competition to grow.

    • by romiz ( 757548 )

      Reportedly, Qualcomm used to file patents to cover only a part of the features of their hardware. The rest was kept as trade secret. As a result, the competitors still needed to pay the patent licenses for Qualcomm IP, but the missing info prevented them to produce competitive components easily.

      This is why choosing WCDMA for 3G destroyed Qualcomm's European competitors. In the end, It worked so well that Qualcomm folded its own 3GPP2 organisation, because the supposedly rival 3GPP standards were much more l

      • Citation? My understanding is that the patent for Viagra was invalidated because they left out the secret sauce to prevent generic copies. So what you're suggesting would invalidate the patent, not reinforce it.
        • by romiz ( 757548 )

          No reliable source on the topic, sorry. But it is quite possible to patent the principles of CDMA - using orthogonal codes to provide multiple users access to the same frequency band - without patenting the technical means to do it with a good power efficiency. If those methods are hard to detect through reverse engineering, it may be a good idea to keep them secret.

          I believe that it is not a coincidence that when WCDMA was introduced, one big complaint from early adopters was the very short standby time c

  • by houghi ( 78078 ) on Wednesday January 24, 2018 @11:53AM (#55992981)

    This was just a decision that was for the people made by the people.

    Americans will find that attitude very un-American.

  • Didn't Apple sue Qualcomm [] because they were over charging? But now we find they were getting a discount... Sometimes I wonder how the accountants and lawyers at these big companies can be so bad at their jobs and still get paid a fortune! Qualcomm should have waived the royalties, as long as Apple didn't "use any other product that was using Qualcomm IP without a license"...
  • if they paid apple rather than apple paying them, what does it matter if their chips dominate if they paid rather than got paid? how do they pay their bills then? capitalism is weird.
  • My Dell XPS 13 nagged me last night to update the BIOS and I declined on the basis I wanted to go to bed and not wait around to see it finish.

    (I'm not brave enough to kick off a BIOS update and then leave the laptop alone for 8 hours)

    Appears I dodged a bullet there.

  • by Anonymous Coward

    EU says, "You have money, we want it.".

  • Wouldn't apple be just as guilty for excepting such an agreement knowing its against the eu laws? seems to me both party colluded.
  • Getting paid billions for shit they'd be doing anyway (Google search default, Qualcomm devices) and making the other side feel like they're getting a deal.

Put not your trust in money, but put your money in trust.