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Isn't this just comparable to any customer doing business with a supplier? If you buy a lot of X, you get a good discount. Given the amount of iPhones in circu

Isn't this just comparable to any customer doing business with a supplier? If you buy a lot of X, you get a good discount. Given the amount of iPhones in circulation, I'm pretty sure Apple needed a significant amount of LTE chips.

dingo_bat 9y ago
All fine unless you have a monopoly.
- xxs 9y ago
  You'd have to do better than throwing a blanket statement. Do you have any references to quote?
- rowyourboat 9y ago
  In European anti-trust law, excluding competitors (or restricting anything regarding third parties) is illegal regardless of your market share. You might come under closer scrutiny if you have a quasi-monopoly, but the behavior is very much not "fine" regardless.
m_mueller 9y ago
Did you read GP’s comment at all? It depends on the strings attached to the discount.
- charlesdm 9y ago
  I have. I just don't see how it's a bribe. This in part, because if Apple essentially ended up being 80% of the market, I don't see how one business relationship can be seen as monopolising. Part of the reason Apple agreed to such a deal is because having a longer term contract will give them a better per unit price. If you follow that line of thinking and Qualcomm gets a fine because of that, the commission should also force Apple to purchase LTE chips from multiple suppliers, because they can force the price down so much due to the fact they're 80% of the market. It goes both ways.
  - gtirloni 9y ago
    "In 2011, Qualcomm signed an agreement with Apple, committing to make significant payments to Apple on condition that the company would exclusively use Qualcomm chipsets in its "iPhone" and "iPad" devices. In 2013, the term of the agreement was extended to the end of 2016." Does it still sound okay to you? http://europa.eu/rapid/press-release_IP-18-421_en.htm http://europa.eu/rapid/press-release_IP-18-421_en.htm
    - tylerhou 9y ago
      That's not the part of the release that's not okay, since paying money to Apple in exchange for use of its chips is indistinguishable from Qualcomm giving Apple a large discount. The part that is not okay is the clawback clause: > The agreement made clear that Qualcomm would cease these payments, if Apple commercially launched a device with a chipset supplied by a rival. Furthermore, for most of the time the agreement was in place, Apple would have had to return to Qualcomm a large part of the payments it had received in the past, if it decided to switch suppliers. This meant that Qualcomm's rivals were denied the possibility to compete effectively for Apple's significant business, no matter how good their products were. They were also denied business opportunities with other customers that could have followed from securing Apple as a customer.
Drakim 9y ago
There is a world of difference between: "Buy five thousand and I'll give you 10% off" "Buy five thousand and don't buy from my rivals and I'll give you 10% off"
- Tuna-Fish 9y ago
  IIRC from the suit, Intel never spelled it outright that you couldn't buy AMD, they just provided sales targets required for discounts/marketing partnerships (which just paid money to the retailer for hanging up Intel advertising) with different purchase amounts for different retailers, and if the retailer started selling AMD, they'd hike up the amount until they were no longer selling AMD.
  - nolok 9y ago
    Spirit of the law and intent are more important than actual wording. At last that's how it should work, and did in that case.
  - megablast 9y ago
    Ok, but how would they know how many the company was selling, and how much to mark up there amount until they weren't getting the discount?
- rishaanpatel 9y ago
  But aren't exclusivity contracts commonplace? Like a contract stating "We'll buy some large amount of product at a discounted price and only purchase from you for the next some number of years." Like Qualcomm could give Apple a lower price now, because decrease in revenue is offset by the promise of future discounted revenue. I don't understand why that's illegal.
- charlesdm 9y ago
  I would assume it to be more like: "Buy five thousand and I'll give you 10% off" "Buy five thousand for the next few years, and only from us, and I'll give you 20% off, because now we know we'll have cashflow for years"
TorKlingberg 9y ago
There's a different between getting a discount "if you buy a lot of X" and "if you don't buy any X from our competitors". The latter in anti-competitive.
- arkades 9y ago
  Why? I’m not being coy; I don’t understand. Isn’t “we will take less money from you if you don’t work with our competitors” one of the cornerstones of a competitive market? I’d understand if the payment went to a corporate officer to act at odds with the interests of his employer, but I guess I don’t see how this is distinct from any other contract to be a sole distributor, sole provider, etc. Certainly their competition could kill such a deal by just beating the price cut?
  - Tomte 9y ago
    > Isn’t “we will take less money from you if you don’t work with our competitors” one of the cornerstones of a competitive market? No. "We take less money for our products than our competitor" is a competitive market.
  - laumars 9y ago
    The difference is market share. If you have a dominant market share and do deals for exclusivity then you are preventing competition from happening.
  - Tuna-Fish 9y ago
    As long as no-one has a dominant market position, such a deal is completely legal and there is nothing wrong with it. It used to be legal regardless of your market share, but during the tail end of the Gilded age, we learned the hard way that once someone gets big enough that they can kill the business of their customers/suppliers by refusing to sell to/buy from them, they can stop playing by the rules of a free market where they compete with others to provide a better product or service at a cheaper price, and instead entrench themself as a permanent monopoly that gets monopoly rents and does not have to fairly compete. So, antitrust laws were born, which limit the kind of actions you can take if you have a commanding market position.

dingo_bat 9y ago

All fine unless you have a monopoly.

xxs 9y ago
You'd have to do better than throwing a blanket statement. Do you have any references to quote?
rowyourboat 9y ago
In European anti-trust law, excluding competitors (or restricting anything regarding third parties) is illegal regardless of your market share. You might come under closer scrutiny if you have a quasi-monopoly, but the behavior is very much not "fine" regardless.

m_mueller 9y ago

Did you read GP’s comment at all? It depends on the strings attached to the discount.

charlesdm 9y ago
I have. I just don't see how it's a bribe. This in part, because if Apple essentially ended up being 80% of the market, I don't see how one business relationship can be seen as monopolising. Part of the reason Apple agreed to such a deal is because having a longer term contract will give them a better per unit price. If you follow that line of thinking and Qualcomm gets a fine because of that, the commission should also force Apple to purchase LTE chips from multiple suppliers, because they can force the price down so much due to the fact they're 80% of the market. It goes both ways.
- gtirloni 9y ago
  "In 2011, Qualcomm signed an agreement with Apple, committing to make significant payments to Apple on condition that the company would exclusively use Qualcomm chipsets in its "iPhone" and "iPad" devices. In 2013, the term of the agreement was extended to the end of 2016." Does it still sound okay to you? http://europa.eu/rapid/press-release_IP-18-421_en.htm http://europa.eu/rapid/press-release_IP-18-421_en.htm
  - tylerhou 9y ago
    That's not the part of the release that's not okay, since paying money to Apple in exchange for use of its chips is indistinguishable from Qualcomm giving Apple a large discount. The part that is not okay is the clawback clause: > The agreement made clear that Qualcomm would cease these payments, if Apple commercially launched a device with a chipset supplied by a rival. Furthermore, for most of the time the agreement was in place, Apple would have had to return to Qualcomm a large part of the payments it had received in the past, if it decided to switch suppliers. This meant that Qualcomm's rivals were denied the possibility to compete effectively for Apple's significant business, no matter how good their products were. They were also denied business opportunities with other customers that could have followed from securing Apple as a customer.

Drakim 9y ago

There is a world of difference between: "Buy five thousand and I'll give you 10% off" "Buy five thousand and don't buy from my rivals and I'll give you 10% off"

Tuna-Fish 9y ago
IIRC from the suit, Intel never spelled it outright that you couldn't buy AMD, they just provided sales targets required for discounts/marketing partnerships (which just paid money to the retailer for hanging up Intel advertising) with different purchase amounts for different retailers, and if the retailer started selling AMD, they'd hike up the amount until they were no longer selling AMD.
- nolok 9y ago
  Spirit of the law and intent are more important than actual wording. At last that's how it should work, and did in that case.
- megablast 9y ago
  Ok, but how would they know how many the company was selling, and how much to mark up there amount until they weren't getting the discount?
rishaanpatel 9y ago
But aren't exclusivity contracts commonplace? Like a contract stating "We'll buy some large amount of product at a discounted price and only purchase from you for the next some number of years." Like Qualcomm could give Apple a lower price now, because decrease in revenue is offset by the promise of future discounted revenue. I don't understand why that's illegal.
charlesdm 9y ago
I would assume it to be more like: "Buy five thousand and I'll give you 10% off" "Buy five thousand for the next few years, and only from us, and I'll give you 20% off, because now we know we'll have cashflow for years"

TorKlingberg 9y ago

There's a different between getting a discount "if you buy a lot of X" and "if you don't buy any X from our competitors". The latter in anti-competitive.

arkades 9y ago
Why? I’m not being coy; I don’t understand. Isn’t “we will take less money from you if you don’t work with our competitors” one of the cornerstones of a competitive market? I’d understand if the payment went to a corporate officer to act at odds with the interests of his employer, but I guess I don’t see how this is distinct from any other contract to be a sole distributor, sole provider, etc. Certainly their competition could kill such a deal by just beating the price cut?
- Tomte 9y ago
  > Isn’t “we will take less money from you if you don’t work with our competitors” one of the cornerstones of a competitive market? No. "We take less money for our products than our competitor" is a competitive market.
- laumars 9y ago
  The difference is market share. If you have a dominant market share and do deals for exclusivity then you are preventing competition from happening.
- Tuna-Fish 9y ago
  As long as no-one has a dominant market position, such a deal is completely legal and there is nothing wrong with it. It used to be legal regardless of your market share, but during the tail end of the Gilded age, we learned the hard way that once someone gets big enough that they can kill the business of their customers/suppliers by refusing to sell to/buy from them, they can stop playing by the rules of a free market where they compete with others to provide a better product or service at a cheaper price, and instead entrench themself as a permanent monopoly that gets monopoly rents and does not have to fairly compete. So, antitrust laws were born, which limit the kind of actions you can take if you have a commanding market position.