Take note(s): Qualcomm’s EUR 1 billion dominance abuse fine quashed

To safeguard a company’s rights of defence, the Commission is obligated to take notes of all formal and informal interviews or conference calls after the launch of an investigation. Moreover, oral evidence provided by third-party informants or complainants must be recorded in a written document.

Companies should bear in mind that there is no such thing as ‘off the record’ for the Commission when conducting investigations. The Commission is likely to brush up on its record keeping practices and to focus (even more) on collecting evidence (and documents) during its investigations to counter a dominant company’s defence on alleged foreclosure effects with sound economic analyses.

Background

In 2018, the Commission imposed a EUR 997 million fine on Qualcomm for abusing its dominant position on the market for LTE baseband chipsets. Baseband chipsets are used to connect smartphones and tablets to cellular networks. According to the Commission, Qualcomm prevented its competitors from entering the market by “making significant payments to a key customer on condition it would not buy from rivals”.

Rights of defence

On appeal, the General Court agreed with Qualcomm that the Commission had breached its rights of defence due to a number of procedural irregularities.

First, the Commission had neglected (i) to inform Qualcomm of a number of third-party contacts it had had during the investigation and (ii) to provide and, on some occasions, to draw up notes of a number of these third-party meetings or conference calls. According to the General Court, it does not suffice for the Commission to provide a brief overview of the topics discussed during an interview: it must provide – in the form of its choosing – an indication of the content of the discussions and the information gathered during all interviews with third parties to safeguard a company’s rights of defence.

In a similar context, the Commission had also failed to inform Qualcomm of the existence or content of a meeting with an anonymous third-party informant held prior to the Commission’s first investigative act. Even though earlier case law (currently under appeal; see our November 2020 newsletter) provides that the Commission need not record interviews which are held prior to the formal launch of an investigation, the General Court found that ‘a written document’ should still be made available of such meetings.

Second, whereas the Commission’s Statement of Objections had related to alleged abusive conduct in the markets for both LTE chipsets and UMTS chipsets, the Commission ultimately dropped the market for UMTS chipsets in the contested decision. Qualcomm had submitted a critical margin analysis aimed at countering the alleged abuse in the markets for both LTE chipsets and UMTS chipsets as set out in the Statement of Objections. The General Court found that the Commission should have given Qualcomm the opportunity to be heard, and to adapt the critical margin analysis, to take account of the reduced scope of the alleged abuse.

The post Intel-test tested

Even though the General Court considered the above-mentioned procedural errors reason enough to annul the Commission’s decision, it continued with an assessment of the Commission’s foreclosure analysis of Qualcomm’s exclusivity payments. It is noteworthy that the latest Intel ruling’s effects-based test (currently under appeal, see our February 2022 newsletter) resonates with the General Court’s current analysis of Qualcomm’s exclusivity payments, thereby underlining the importance of detailed evidence gathering as a basis for a sound economic analysis.

According to the General Court, the Commission had not taken all of the relevant factual circumstances into account when assessing whether Qualcomm’s exclusivity payments were capable of producing foreclosure effects as a result of Apple’s reduced switching incentives. The General Court was particularly unconvinced of that capability because, at that period in time, Apple had had no alternative to Qualcomm’s LTE chipsets for the majority of its supplies, due to Apple’s own technical requirements. Because the Commission’s analysis had ignored this fact, it had not taken all the relevant factual circumstances into account and was therefore unlawful.

The screws are tightened

The Commission will need to step up its recording activities when holding meetings with third parties in the context of (potential) antitrust investigations. Even though the minutes of such meetings do not need to include a verbatim account, they should – at the very least – provide the “precise content” of the discussions which took place during the interview, including the nature of the information provided during the interview on the subjects addressed.

In addition, all relevant factual circumstances must be taken into account when analysing the potential anti-competitive foreclosure effects of alleged abusive conduct. The Commission is therefore bound to boost its economic analysis along the lines of the Intel-criteria to counter a dominant company’s defence.