Qualcomm decision and €1 billion fine quashed

On 15 June 2022, the EU General Court (GC) annulled in its entirety the European Commission’s (Commission) decision establishing an abuse of dominance by Qualcomm, thereby imposing on Qualcomm a fine of €997 million (Decision).

Back in 2018, the Commission found Qualcomm to having abused its dominant position in the LTE chipset market (for mobile devices). Qualcomm had entered into agreements with Apple for certain of its devices. These agreements among others entailed Qualcomm providing payments to Apple in return for exclusivity. The Commission considered that these payments were capable of generating anti-competitive effects by reducing Apple's incentives to switch to competing LTE chipset suppliers such as Intel.

Qualcomm brought an action for annulment against this Decision. The GC, after a very thorough review, established several procedural irregularities that affected Qualcomm's rights of defence. In particular, the GC found that the Commission had violated Qualcomm's rights of defence by:

• failing to properly record any interviews and exchanges conducted for the purpose of collecting information relating to the subject matter of an investigation. Such procedural failure can only constitute an annulment ground to the extent the undertaking concerned would have been better able to ensure its defence in the absence of such failure. The GC considered this to be the case for Qualcomm.

• changing the scope of the alleged conduct, as developed in the statement of objections, to the extent that the defence of the applicant had been rendered meaningless. While the GC confirmed that the Commission can abandon objections in its Decision, it reiterated that the Commission cannot take into consideration new facts or alter evidence without communicating a new statement of objections. In this case the economic analysis submitted by Qualcomm to demonstrate the lack of anti-competitive effects – more specifically the critical margin analysis to demonstrate an as efficient competitor could profitably compete to supply Apple – was found to be no longer relevant after the Commission had withdrawn its objections relating to UMTS chipsets (maintaining only the objections regarding the LTE chipsets). The GC ruled that this concerned an alteration of evidence – and not just an abandonment of objections – and that Qualcomm should have been given the opportunity to adapt its critical margin analysis.

In addition, the GC also identified flaws in the Commission's analysis of the anti-competitive effects of the incentive payments. After reiterating the case-law regarding (judicial review of) rebates (as set out in particular in the Intel judgments), the GC noted that the Commission had failed to take into account several key elements:

• First, in its analysis of the possible reduction of Apple's incentives to switch to competing LTE chipset suppliers, the GC ruled that the Commission had failed to take into account the fact that for all iPhones to be launched between 2011 and 2015 and more than half of the iPhones to be launched in 2016, Apple had no technical alternative to Qualcomm's LTE chipsets and therefore could not switch to competing suppliers (irrespective of incentive payments).

  Also in relation to certain models of iPads to be launched in 2014 and 2015, the GC found that, in its analysis of the incentive effects of Qualcomm's payments to Apple, the Commission had failed to take into account the fact that Intel's chipsets were simply not selected by Apple due to their inability to meet Apple's technical and timing requirements for these devices. The GC ruled that the Commission had not conducted a real investigation into the existence of competing LTE chipsets which Apple technically could have used instead.

  Interestingly, in the GC proceedings the Commission had argued that the payments not so much incentivised Apple for those chips for which it had no technical alternative but foreclosed competitors on the contestable share (the leverage effect). The GC rejected this argument on the grounds that this argument did not align with the theory of harm set out in the Decision.

• Second, the GC ruled that the Commission had done no more than conclude that the payments concerned were exclusivity payments which it found to be insufficient to conclude that those payments constituted an abuse. It referred in this respect to its case-law and reiterated the need of an analysis of (i) the capability of the payments to have anti-competitive effects and (ii) the foreclosure capacity of at least as-efficient competitors in light of all the relevant factual circumstances.

Overall, the GC held that the Commission's analysis of the impact of the payments on Apple's incentive to switch to Qualcomm's competitors for the supply of chipsets for the iPad models to be launched in 2014 and 2015 was insufficient because of:

• The lack of weight and causality in the evidence put forward by the Commission;
• The lack of relevance of Apple's statements on which the Commission relied;
• The Commission's consideration of evidence the content of which was contradicted by other evidence;
• The Commission's consideration of evidence that did not support the Commission's conclusions in relation to the models allegedly concerned and, in general, the lack of consistency in the evidence provided by the Commission.

With this judgment, the GC follows the same approach as in its Intel judgment – embarking upon an exceptionally detailed factual examination of the Decision and of the arguments on both sides. The Commission now has the choice between leaving the case behind it, adopting a new decision vis-à-vis Qualcomm (taking into account the GC’s remarks including in particular the need to avoid the cherry picking of evidence) or appealing the GC’s judgment. The latter appears likely considering the Commission has also appealed the GC’s last judgment in the Intel case. In the meantime however, it has to reimburse yet another significant fine.