On June 8, 2020, the Commission published its decision to fine U.S. based chipset producer Qualcomm a total of €997 million for abusing its dominant position by offering payments to Apple under the condition that Apple purchases from Qualcomm all LTE chipsets for iPhones and iPads.[1] This is the first time the Commission issued a decision on exclusivity payments since the Court of Justice’s ground-breaking Intel judgment in 2017.[2] Qualcomm’s appeal against the decision is pending before the General Court.[3]

Qualcomm’s exclusivity payments to Apple

In February 2011, Qualcomm entered into an agreement with Apple for the supply of LTE baseband chipsets. Under the agreement, which was in place for almost 6 years, Apple was entitled to receive payments (e.g., lump sum, volume-based, and per-device payments) from Qualcomm if Apple obtained LTE chipsets exclusively from Qualcomm for iPhone and iPad models that had been launched after October 1, 2011. The agreement also provided for the automatic termination and reimbursement of a portion of Qualcomm’s payments if Apple were to commercially sell an iPhone or iPad “that incorporate[d] a non-Qualcomm cellular baseband modem.”[4] The agreement was terminated in September 2016, following Apple’s launch of iPhone 7 that incorporated Intel’s chipsets. Between 2011 and 2015, Apple purchased $20 billion worth of LTE chipsets from Qualcomm only, and in return received between $2–3 billion from Qualcomm.

The Commission’s assessment

The Commission concluded that between 2011 and 2016 Qualcomm held a dominant position in the worldwide market for LTE chipsets in which Qualcomm’s market share remained above 70% and was protected by high barriers to entry and expansion. Qualcomm’s brand image and its strong relationships with its customers made it difficult for less known suppliers to enter the market without offering significant discounts. The Commission also concluded that a potentially strong countervailing buyer power exercised only by a limited number of customers (e.g., Apple, Samsung, Huawei) did not undermine Qualcomm’s dominance.

The Commission found Qualcomm’s conduct to be abusive based on the legal test set out in the Intel judgment:[5] exclusivity-inducing payments offered by a dominant undertaking are presumed illegal unless the dominant undertaking offers evidence that the conduct in question is not capable of restricting competition and producing foreclosure effects. If the undertaking offers such evidence, the Commission is then obliged to analyze in more detail whether the payment is abusive, taking into account a number of circumstances, including: (i) the degree of the company’s dominant position; (ii) the share of the market covered by the exclusivity-inducing payments; (iii) their conditions, duration, and size; and (iv) the potential strategy to exclude as-efficient competitors.[6]

The Commission found Qualcomm’s exclusivity- inducing payments to be exclusionary and therefore abusive based on all four factors, however, the Commission’s analysis in particular focused on three. First, exclusivity payments reduced Apple’s incentive to switch to competing LTE chipset suppliers. For example, in its response to the Commission’s request for information, Apple explained that it “would likely have selected Intel baseband chipsets for its 2014 iPad models but for Qualcomm’s rebates conditioned on exclusivity.”[7] Second, although Apple accounted on average for only 25–35% of LTE baseband chipset purchases worldwide, the Commission concluded that exclusivity payments covered a significant share of the LTE market.[8] In the Commission’s view, Apple accounted for “not a small portion of demand”[9] and Qualcomm’s payment were offered during a time of strategic market development, when the demand for LTE chipsets was growing rapidly. Third, Apple was considered an important customer for entry or expansion, with Qualcomm’s internal documents referring to Apple as “the world’s most significant customer of baseband chipsets.”[10]

The as-efficient-competitor test

To rebut the presumption that Qualcomm’s payments were capable of foreclosing LTE chipset competitors, Qualcomm submitted a “critical margin analysis” claiming that a competitor as efficient as Qualcomm could profitably compete despite Qualcomm’s payments. The Commission endorsed the as-efficient competitor test in its guidelines on applying Article 102 of the Treaty on the Functioning of the EU (“TFEU”)[11] and applied it in the Intel decision.[12]

In Qualcomm, however, the Commission did not conduct its own as-efficient-competitor test and instead concluded that Qualcomm’s analysis does not show that its exclusivity payments were incapable of having anticompetitive effects. According to the Commission, Qualcomm’s analysis was based on three incorrect assumptions.

First, the analysis assumed that a competitor would only have had to cover average variable costs, which was rejected by the Commission because the LTE chipset market is characterized by high fixed costs in the form of R&D expenses. As such, any hypothetical competitor would also have had to cover a share of fixed costs. Second, none of Apple’s requirements for iPhone generations in 2013, 2014, and 2015 were contestable, contrary to Qualcomm’s claims. Third, Qualcomm’s analysis failed to take into account that had Apple switched to another supplier, Apple would have also foregone payments in relation to upcoming iPhone and iPad generations. In particular, Qualcomm’s analysis treated future payments as not being conditional on Apple obtaining all of its requirements from Qualcomm.

The Commission concluded it was not required to conduct its own as-efficient-competitor test because it is only one of the factors to analyze whether conduct is abusive.[13] However, since the Court of Justice recently held that not every exclusionary effect is necessarily detrimental to competition, and competition on the merits may lead to market exit of less efficient competitors;[14] one would have expected, contrary to the approach taken in the present case, the Commission to carry out its own as-efficient-competitor test, as it did so in previous similar cases.[15]


The Decision confirms that exclusivity payments offered by dominant companies still carry significant legal risks, even though companies may rebut the presumption of illegality.[16] However, it remains to be seen to what extent such a rebuttal can succeed in practice.

In April 2018, Qualcomm appealed the Decision by claiming, among other things, that the Commission erred in its finding that the alleged conduct was capable of producing any potential anticompetitive effects.[17] The judgment may clarify whether the Commission is obliged to carry out the as-efficient- competitor test when dealing with price-based exclusionary conduct, among other things.

[1]      Qualcomm (Exclusivity payments) (Case COMP/AT.40220), Commission decision of January 24, 2018 (“Decision”).

[2]      Intel v. Commission (Case C-413/14 P) EU:C:2017:632 (“Intel judgment”), which was discussed in our Alert Memorandum on October 16, 2017.

[3]      Qualcomm v. Commission (Case T-235/18), action brought on April 6, 2018.

[4]      Decision, para. 152. See also paras. 158, 162, and 165 of the Decision.

[5]      Decision, paras. 382–385.

[6]      Intel judgment, para. 139.

[7]      Decision, para. 443.

[8]      Interestingly, during certain periods of the infringement, Apple was found to account for less than 10% (in 2011) and less than 30% (in 2015) of the total worldwide demand for LTE chipsets (see Decision, para. 468).

[9]      Decision, para. 470.

[10]    Decision, para. 483.

[11]    Communication from the Commission — Guidance on the Commission’s enforcement priorities in applying Article 82 of the EC Treaty to abusive exclusionary conduct by dominant undertakings, OJ C 45, 24.2.2009.

[12]    Intel (Case COMP/AT.37990), Commission decision of May 13, 2009.

[13]    Decision, para. 553.

[14]    Intel judgment, para. 134; see also Post Danmark (Case C-209/10) EU:C:2012:172, para. 22.

[15]    See Intel (Case COMP/AT.37990), Commission decision of May 13, 2009, paras. 1002–1576.

[16]    Hoffmann-La Roche v. Commission (Case C-85/76) EU:C:1979:36, para. 89.

[17]    Qualcomm v. Commission (Case T-235/18), action brought on April 6, 2018.