Rare EU Antitrust Victory for Qualcomm Before the EU General Court

Following an utterly inadequate “investigation” sparked, as it would transpire much later, by an informal complaint made by a third-party in summer 2014, the European Commission (“Commission”) adopted in January 2018 a decision finding that Qualcomm had abused a dominant position by entering into an agreement with Apple providing for payments conditioned upon Apple buying LTE chipsets exclusively from Qualcomm. The decision imposed on Qualcomm a fine of EUR 997 million (c. USD 1 billion) – one of the highest fines ever imposed by the Commission for a violation of the EU’s antitrust laws.

In April 2018, Qualcomm filed with the EU General Court an application seeking the annulment of the Commission’s decision. There followed several further rounds of written pleadings, including the submission by Qualcomm in July 2019 of dozens of documents obtained from Apple as a result of Section 1782 discovery proceedings brought by Qualcomm in the U.S.. Those documents proved to be crucial: they contained material that not only revealed grave breaches of Qualcomm’s rights of defence committed during the investigative phase but also impugned the theory of harm underpinning the Commission’s final decision attaching antitrust liability. The case was argued during a three-day oral hearing held in May 2021 before the EU General Court.

In a landmark judgment handed down on 15 June 2022, the Court annulled in its entirety the Commission’s decision. The ruling is an unprecedented and emphatic win for Qualcomm that vindicates the creative, tenacious, and, when required, aggressive, legal strategy adopted in this case from its inception in summer 2014.
More specifically, the General Court annulled in full the Commission’s decision on various procedural grounds (multiple failures to observe due process during the investigation) as well as on substantive grounds (manifest errors in assessing the actual and potential anticompetitive effects of Qualcomm’s conduct).

Regarding procedure:

• The Court found that the Commission had failed to keep proper notes of meetings with third parties or to provide them to Qualcomm at a time when they would have allowed Qualcomm to exercise its rights of defence. The Court described the notes belatedly provided to Qualcomm as “meaningless,” accepted Qualcomm’s argument that a number of them were actually drawn up or edited years after the relevant meetings took place, and condemned the Commission’s overall “lack of precision” in compiling the investigation file; and
• The Court held that Qualcomm had not been given the opportunity to defend itself adequately in respect of important elements of the Commission’s decision. Notably, between the statement of objections (in essence, the charge sheet) and the final decision, the Commission changed the theory of harm pursued and dropped its objections in relation to certain chipsets found to belong to a different relevant product market without affording Qualcomm the opportunity to submit new economic evidence and comment on the Commission’s revised position.

Regarding substance:

• The Court reasoned that the Commission had failed to establish that the impugned conduct could produce the actual or potential anticompetitive effects alleged in the decision. The Commission had failed properly to apply the governing EU case law and, in particular, to take account of “all the relevant factual circumstances,” e.g., the fact that, for much of the period concerned, Qualcomm’s rivals were unable to offer chipsets capable of satisfying Apple’s technical requirements; and
• The Court held that Commission’s analysis of “actual effects,” i.e., findings made in respect of the alleged foreclosure of rival chipset suppliers from certain 2014 and 2015 cellular iPads, were “vitiated by a lack of consistency in the evidence relied on in support of its findings.” The Court reiterated that the analysis of anticompetitive capability cannot be purely hypothetical, held that the Commission’s assessment did not support the conclusion that the payments made by Qualcomm had reduced Apple’s incentives to switch to a rival chipset supplier, and found that the Apple documents and submissions on which the decision relied did not support its findings regarding the alleged foreclosure.

Although the judgment may be appealed to the Court of Justice of the EU, it seems unlikely that it would be overturned. This is because the General Court went to great pains to examine and adjudicate on a large numbers of pleas each of which, on its own, would have justified annulling the Commission’s decision.

Prevailing in abuse of dominance cases is extremely rare: the present case appears to mark the first time in 20 years the Court has quashed at first instance a Commission abuse of dominance decision. This is also a pioneering case, in that it constitutes the first time the EU Courts, which traditionally reject the use of “foreign” documents in cases before them, have accepted evidence obtained through Section 1782 proceedings.