Qualcomm’s €997m fine latest in Margrethe Vestager’s long list

Qualcomm's €997 million fine for breaching antitrust rules is just the latest in a long list of financial penalties dished out by EU competition commissioner Margrethe Vestager since she took office in 2014.

In total, more than €7 billion in fines has been meted out to companies for cartel activity by Ms Vestager during her time as commissioner.

A cartel occurs when a group of similar, independent companies join together to fix prices, to limit production or to share markets or customers between themselves. Consequently, consumers and businesses end up paying more for less.

Action against cartels is a specific type of antitrust enforcement.

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The European Commission fined companies a total of €1.7 billion in 2014; €350 million in 2015; €3.7 billion in 2016; and €1.9 billion in 2017. That makes a total of about €7.7 billion under Vestager's stewardship.

In 2014, the European Commission made 52 decisions in relation to cartel activity. This came down to 21 in 2015; 16 in 2016; and 31 in 2017. These decisions include entities that escaped fines after striking immunity agreements.

Vestager's most significant ruling in terms of cartel activity related to the trucking industry in 2016 when five of Europe's biggest truckmakers - Daimler, DAF, Scania, Iveco and Volvo/Renault – were fined a record €2.9 billion between them.

The commissioner accused them of colluding to fix prices and dodge the costs of stricter pollution rules. She said the companies had hatched the plan 14 years previous in a “cosy” Brussels hotel, going on to fix prices and co-ordinate on the timing of introducing new emission technologies in 1997 and on passing on costs of those new technologies.

Biggest fine

Daimler received the biggest fine at €1 billion while Volkswagen-owned MAN escaped a penalty because it had alerted the European Commission to the cartel.

Volvo, Sweden’s biggest company by revenue, received a €670.5 million fine, and Iveco, which is part of Italian truck and tractor maker CNH Industrial, was fined almost €500 million.

DAF Trucks, owned by Paccar, was handed a penalty €753 million. The four companies admitted wrongdoing in return for a 10 per cent cut in the penalties imposed.

Scania did not settle and was further investigated before it was fined €880 million for its role in the activity. Between them, the companies make more than nine out of every 10 medium and heavy trucks sold in Europe.

Other activity investigated by Vestager concerns “abuse of dominance”, which is when a company restricts competition from a position of strength in a given market. A dominant position is not in itself anti-competitive, but if the company exploits this position to eliminate competition, it is considered to have abused it.

The biggest penalty imposed in this area by Vestager involved Google last year when the tech giant was fined €2.4 billion for abusing its monopoly over internet searches to unfairly promote its own shopping comparison service.

Google, at the end of a seven-year investigation, was given 90 days to put its search engine right or face daily fines of up to 5 per cent of the average daily turnover of Alphabet, Google’s parent company.

The fine represented close to 2.5 per cent of the company’s yearly sales, which were €89 billion in 2016. The EU maximum penalty is 10 per cent of yearly sales.

Qualcomm

Qualcomm is the other major case in this area. It was fined almost €1 billion for paying Apple to shun rival chips in its iPhones.

The biggest maker of chips that help run smartphones “paid billions of US dollars to a key customer, Apple, so that it would not buy from rivals”, Vestager said in an emailed statement.

“This meant that no rival could effectively challenge Qualcomm in this market, no matter how good their products were.”

The fine represented 4.9 per cent of Qualcomm’s revenue in 2017.

The third significant branch of Vestager’s portfolio involves illegal state aid. In 2016, she ruled that the Irish Government had offered state aid to Apple in the way it allowed the company to arrange its tax affairs.

Apple was ordered to pay the Irish State €13 billion, plus interests and penalties. However, this is not considered to be a fine, but instead a “recovery order”, which involves the re-establishing of the situation before the state aid was extended.