TR Daily EC Fines Qualcomm 242M Euros for 3G Chipset Antitrust Violation
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Thursday, July 18, 2019

EC Fines Qualcomm 242M Euros for 3G Chipset Antitrust Violation

The European Commission today announced a 242 million Euros ($U.S. $271.7 million) fine against Qualcomm, Inc., for violating antitrust law by abusing its market dominance as long as a decade ago in the sale of 3G baseband chipsets.

“Baseband chipsets are key components so mobile devices can connect to the Internet. Qualcomm sold these products at a price below cost to key customers with the intention of eliminating a competitor,” said Commissioner Margrethe Vestager, who is in charge of competition policy. “Qualcomm's strategic behaviour prevented competition and innovation in this market, and limited the choice available to consumers in a sector with a huge demand and potential for innovative technologies. Since this is illegal under EU antitrust rules, we have today fined Qualcomm €242 million.”

“Today's decision concludes that Qualcomm held a dominant position in the global market for UMTS [universal mobile telecommunications system] baseband chipset between 2009 and 2011. This is based in particular on Qualcomm's high market shares of approximately 60% (almost three times the market share of its biggest competitor) and the high barriers to entry to this market. These include the significant initial investments in research and development to design UMTS chipsets and various barriers related to Qualcomm's intellectual property rights,” the EC said in a news release.

“Market dominance is, as such, not illegal under EU antitrust rules. However, dominant companies have a special responsibility not to abuse their powerful market position by restricting competition, either in the market where they are dominant or in separate markets. However, our investigation found that Qualcomm abused this dominance between mid-2009 and mid-2011 by engaging in ‘predatory pricing’. Qualcomm sold certain quantities of three of its UMTS chipsets below cost to Huawei and ZTE, two strategically important customers, with the intention of eliminating Icera, its main rival at the time in the market segment offering advanced data rate performance.

“This behaviour took place when Icera was becoming a viable supplier of UMTS chipsets providing high data rate performance, thus posing a growing threat to Qualcomm's chipset business,” the EC added.

The EC said it “concluded that Qualcomm's conduct had a significant detrimental impact on competition. It prevented Icera from competing in the market, stifled innovation and ultimately reduced choice for consumers. In May 2011, Icera was acquired by US tech company Nvidia, which decided to wind down its baseband chipset business line in 2015.”

”The fine in this case of €242 042 000 takes account of the duration and gravity of the infringement,” the EC said. “The fine represents 1.27% of Qualcomm's turnover [revenues] in 2018 and is also aimed at deterring market players from engaging in such anti-competitive practices in the future.”

The EC opened its antitrust investigation four years ago (TR Daily, July 16, 2015).

Qualcomm said it plans to appeal the decision to the General Court of the European Union.

“The Commission spent years investigating sales to two customers, each of whom said that they favored Qualcomm chips not because of price but because rival chipsets were technologically inferior. This decision is unsupported by the law, economic principles or market facts, and we look forward to a reversal on appeal,” said Don Rosenberg, Qualcomm’s executive vice president and general counsel.

“The Commission’s decision is based on a novel theory of alleged below-cost pricing over a very short time period and for a very small volume of chips. There is no precedent for this theory, which is inconsistent with well-developed economic analysis of cost recovery, as well as Commission practice,” Mr. Rosenberg added. “Contrary to the Commission’s findings, Qualcomm's alleged conduct did not cause anticompetitive harm to Icera, the company that filed the complaint. Icera was later acquired by Nvidia for hundreds of millions of dollars and continued to compete in the relevant market for several years after the end of the alleged conduct. We cooperated with Commission officials every step of the way throughout the protracted investigation, confident that the Commission would recognize that there were no facts supporting a finding of anti-competitive conduct. On appeal we will expose the meritless nature of this decision.” —Paul Kirby, [email protected]

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