Lawyers have labelled the European Commission’s court defeat against chipmaker Qualcomm as an “extremely disappointing loss” for the competition enforcer that could affect its appetite to crack down on big tech in the future.
The U.S. tech company triumphed against a €997 million fine imposed by EU antitrust regulators for allegedly illegal exclusivity rebates with Apple. Europe’s second-highest court annulled a 2018 decision by the European Commission to impose the near-billion euro fine on Qualcomm for its use of incentive payments to Apple in exchange for exclusive use of its chipsets, “preventing competition on the merits.”
The Court faulted the competition enforcer over “major procedural irregularities,” a development which Jens Peter Schmidt, antitrust partner at Noerr’s Brussels office, called “a major defeat for the Commission”.
“First, the Court observed ‘major procedural irregularities,’ as the Court put it, which affected Qualcomm’s right of defence,” Schmidt said. “The EC simply did not properly run the case, by, for instance, not recording meetings with third parties adequately, and not giving Qualcomm the chance to comment on the charges after they were modified by the EC.”
“Second, as to substance, the Court questioned that the rebates under investigation were indeed anti-competitive and criticized that the EC did not take all relevant facts into account,” he said.
Consequently, Schmidt said he would not be surprised if the EC may become less keen to pursue such rebate cases in the future.
At the same, the body will now need to step up its own administration efforts. “That will cause potentially yet longer proceedings,” he said.
Though the Commission may appeal the case on matters of law at the European Court of Justice (CJEU), the development nevertheless adds another blemish to Competition Commissioner Margrethe Vestager’s bid to rein in big tech, following another significant loss in January against Intel, resulting in a €1.06 billion fine being overturned.
“It’s a very high profile, extremely disappointing loss for the EC,” Clemens Graf York von Wartenburg, a Dechert partner focused on EU and German competition law, said.
Speculating on the impact developments may have on future enforcement, he said a question is whether the commission will become more cautious about approaching these types of dominance cases in the future.
At the same time, the partner said he didn’t think the Commission’s agenda will change.
“I think they would still be eager to investigate abuse cases, but their internal threshold may become higher, and if the threshold is higher that means, at least theoretically, fewer cases will advance to the stage of a statement of objections or to a final decision,” he said.
According to York von Wartenburg, a few more general court judgments could be likely before the year is out.
“The end of the year will be a good time to take stock,” he said. “And this is likely to influence the way people view Margaret Vestager’s tenure and her legacy, because she had built up a reputation as a tough enforcer.”
The EC is soon to face another key verdict, with Google currently appealing a €4.34 billion fine at the CJEU.
Qualcomm was represented by a Quinn Emmanuel Urquhart & Sullivan team, led by Brussels competition partner Miguel Rato, counsel Marixenia Davilla and Mark English, as well as lawyers Athena Kontosakou, Pedro Fajardo, Susanna Kärkelä Maria Belen Gravano, Hyunseok Doh and Julie Lacoste, according to a firm statement.
The EC was advised through the European Commission’s Legal Service and was represented by Nicholas Khan QC, Anthony Dawes and Carlos Urraca Caviedes, according to court documents.
In a statement, the Commission said: “The European Commission takes note of the judgement by the General Court that annulled the Commission’s 2018 Decision which found that Qualcomm had abused its dominant position. The Commission will carefully study the judgement and its implications and will reflect on possible next steps.”