Qualcomm is under investigation by the European Union's antitrust authority, which suspects the company of abusing its dominant position in the market for 3G and 4G chipsets used in smartphones and tablets.
The European Commission has initiated proceedings against Qualcomm in two investigations, it said Thursday. The first concerns whether Qualcomm breached EU antitrust rules by offering financial incentives to phone manufacturers on condition that they buy chipsets exclusively, or mostly, from the company; the second, whether Qualcomm engaged in predatory pricing, selling below cost to force competitors out of the market.
Mobile processors and baseband chipsets, which handle the communications protocols used in wireless networks, form a significant proportion of the cost of a mobile phone and, at least at the low end of the market, margins are getting thinner, leaving phonemakers more vulnerable to pricing pressures from their suppliers.
The EU Commissioner in charge of competition policy, Margrethe Vestager, said "We are launching these investigations because we want to be sure that high tech suppliers can compete on the merits of their products. Many customers use electronic devices such as a mobile phone or a tablet and we want to ensure that they ultimately get value for money. Effective competition is the best way to stimulate innovation."
Qualcomm's business practices have come under antitrust authorities' scrutiny before. Earlier this year, Chinese regulators fined Qualcomm $975 million for overcharging device makers there.
[...]
Qualcomm said it had been notified that the Commission had initiated proceedings against it in the two ongoing investigations. It will continue to cooperate with the Commission, but believes the concerns are without merit, it said.
More coverage of this story can be found at The Register and ITWorld.
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Qualcomm could face as much as a $2.7 billion fine (10% of its 2014 global revenues) if found guilty of new European Commission antitrust charges:
The European Commission (EC) [has] charged Qualcomm with violating antitrust rules in the European Union (EU). The EC said that Qualcomm abused its powers to thwart rivals by paying OEM customers to buy chips exclusively from the company.
Earlier this year, Qualcomm was found guilty with violating antitrust laws in China as well, and it was forced to pay a record $1 billion fine. China accused Qualcomm of maintaining royalty rates for 3G and 4G technologies that were too high. The Chinese government demanded that alongside the $1 billion fine, Qualcomm would also have to lower its license prices for its patents by a third.
Qualcomm is also being investigated for its licensing prices in Japan and South Korea. The EU also investigated Qualcomm for unreasonably high licensing prices in 2009, but it ended up dropping that investigation.
This time, the antitrust accusations in the EU are different and much more damning for the company. The EU's competition enforcer said that Qualcomm may have illegally paid a major customer for exclusively using its chips. It also said that Qualcomm sold chipsets below cost to drive competitors out of the market, which is a strategy that is called "predatory pricing."
The predatory pricing accusation came from Icera, a maker of software-defined radio technology. The company was later acquired by Nvidia but could never successfully break into the modem market, which is why Nvidia later decided to sell it.
Previously: EU Investigates Qualcomm For Antitrust Activities
The U.S. FTC is going after Qualcomm:
The Federal Trade Commission filed a complaint in federal district court charging Qualcomm Inc. with using anticompetitive tactics to maintain its monopoly in the supply of a key semiconductor device used in cell phones and other consumer products. Qualcomm is the world's dominant supplier of baseband processors – devices that manage cellular communications in mobile products. The FTC alleges that Qualcomm has used its dominant position as a supplier of certain baseband processors to impose onerous and anticompetitive supply and licensing terms on cell phone manufacturers and to weaken competitors.
[...] According to the complaint, by threatening to disrupt cell phone manufacturers' supply of baseband processors, Qualcomm obtains elevated royalties and other license terms for its standard-essential patents that manufacturers would otherwise reject. These royalties amount to a tax on the manufacturers' use of baseband processors manufactured by Qualcomm's competitors, a tax that excludes these competitors and harms competition. Increased costs imposed by this tax are passed on to consumers, the complaint alleges. By excluding competitors, Qualcomm impedes innovation that would offer significant consumer benefits, including those that foster the increased interconnectivity of consumer products, vehicles, buildings, and other items commonly referred to as the Internet of Things.
Get in line:
EU Investigates Qualcomm For Antitrust Activities
Qualcomm Faces EU Antitrust Charges Over "Predatory Pricing"
Qualcomm Fined $853 Million by South Korea for Antitrust Violations
Also at Bloomberg and The Verge.
Qualcomm Gets $1.2 Billion EU Fine for Apple Chip Payments
Qualcomm Inc. was fined 997 million euros ($1.2 billion) by the European Union for paying Apple Inc. to shun rival chips in its iPhones.
The largest maker of chips that help run smartphones "paid billions of U.S. dollars to a key customer, Apple, so that it would not buy from rivals," EU Competition Commissioner Margrethe Vestager said in an emailed statement on Wednesday. "This meant that no rival could effectively challenge Qualcomm in this market, no matter how good their products were."
Qualcomm struck a deal with Apple in 2011 that pledged significant payments if Apple only used Qualcomm chipsets for the iPhone and iPad devices. That agreement was renewed in 2013 until 2016. Qualcomm warned it would stop these payments if Apple sold another product with a rival chip. This effectively shut out competitors such as Intel Corp. from the market for LTE baseband chipsets used in the 4G mobile phone standard for five years, the EU said.
European Commission press release. Also at Reuters.
Previously: EU Investigates Qualcomm For Antitrust Activities
U.S. Federal Trade Commission Sues Qualcomm for Anti-Competitive Practices
Apple Could Switch From Qualcomm to Intel and MediaTek for Modems
Related: Apple vs. Qualcomm Escalates, Manufacturers Join in, Lawsuits Filed in California and Germany
Qualcomm Files New Lawsuit Against Apple, Alleging it Shared Confidential Information with Intel
Broadcom Offers $105 Billion for Qualcomm; Moves HQ Back to the USA
(Score: -1, Troll) by Anonymous Coward on Thursday July 16 2015, @03:38PM
Another successful US company being investigated by the EU? What a surprise!
(Score: 2) by jcross on Thursday July 16 2015, @04:28PM
Well if we let large companies unfairly suppress the up-and-comers, they'll eventually use their monopoly powers to screw the customer and at the same time their products will go to shit because they don't need to compete on quality. In the very long term this will be bad for everyone, even the companies in question; see Microsoft. Let me know when the EU beats up on someone who's making bank on the value proposition of their product and not on sheer muscle.
(Score: 0) by Anonymous Coward on Thursday July 16 2015, @04:43PM
It's not Qualcomm's fault that EU companies are shitty competitors.
(Score: 0) by Anonymous Coward on Thursday July 16 2015, @04:53PM
There, I think that's what you meant.
In the last three months they've brought charges against Qualcomm, Amazon, Google, Apple, and Facebook.
It's funny, if you look at the Competition Commission's news page [europa.eu], you see lots of "approves" and "deal cleared" for EU company actions (mergers, etc.), and lots of investigations into non-EU companies. At what point do you say there is something to this pattern that goes beyond the law?
(Score: 0) by Anonymous Coward on Thursday July 16 2015, @05:02PM
The EU companies can't compete so the commission has to punish the US companies for being too successful.
(Score: 2) by jcross on Thursday July 16 2015, @05:14PM
Can you give some examples of European competitors to these companies, which the EU might be protecting? I don't see this happening with say, car companies or Boeing, where the EU does have prominent competitors, but maybe it's just that the European Amazon or Google competitor is not so well known?
(Score: 3, Interesting) by janrinok on Thursday July 16 2015, @05:05PM
I think that maybe you are missing the point. America is currently promoting a trade agreement to ensure fair trade between Europe and America - in both directions - not just one. If you think the EU is picking on US companies now, wait until the TTIP is forced upon us. The agreement means that we can take more US companies to court in Europe and the results will be binding both in Europe and inside the US.
You should do a little more research - the EU does far more of this sort of thing to EU companies to ensure fair trade and practices between nations - but that doesn't get noticed by those outside of Europe. Just one example, it will soon cost no more to use mobile roaming in Europe than it will to use your mobile/cell in your native European country. No more individual companies gouging phone users because they happen to have traveled on holiday or, in some instances, have simple driven a short distance from one country to another. We like this sort of thing. It is the US that has the bad reputation for making service something that people cannot afford, and we will do what we want to ensure that US companies don't try to bring unfair practices here.
I am not interested in knowing who people are or where they live. My interest starts and stops at our servers.
(Score: 0) by Anonymous Coward on Thursday July 16 2015, @05:08PM
You should do a little more research
I should do research for your claims?
the EU does far more of this sort of thing to EU companies to ensure fair trade and practices between nations - but that doesn't get noticed by those outside of Europe.
And all the citations you provided formed quite the convincing case. Oh wait...
(Score: 3, Insightful) by janrinok on Thursday July 16 2015, @05:26PM
Well, in that case, carry on whining.
If you want to trade in a country, you have to play by their rules, not the one's that you would like to bring with you.
I am not interested in knowing who people are or where they live. My interest starts and stops at our servers.
(Score: 0) by Anonymous Coward on Thursday July 16 2015, @05:27PM
Well, in that case, carry on whining.
Translation: You have no evidence to back up your claims so you'll just sling ad homs.
(Score: 0) by Anonymous Coward on Thursday July 16 2015, @06:45PM
Well, in that case, carry on whining.
Translation: You have no evidence to back up your claims so you'll just sling ad homs.
Nice to see the tradition of the "ugly American" continued with such verve! And yes, this is an argumentum ad hominem, but that is not always a fallacy, since sometimes the moral character of the person is relevant to the case.
(Score: 0) by Anonymous Coward on Thursday July 16 2015, @08:27PM
American? Hardly. I'm about 100 kg too light to be an American.
(Score: 1, Interesting) by Anonymous Coward on Thursday July 16 2015, @06:44PM
Qualcomm is the Intel or M$ of wireless communications tech. They own a ridiculous number of patents over wireless, and invented CDMA (at least for phones). No one else can come close because no one else owns the core patent portfolio for all these technologies.
And that's just the stuff we know about. Companies started by ex-Qualcomm people can easily be found in a quick search that make stuff for the US Military. Compared to them, everyone else is running incredibly far behind.
Just to top things off, Qualcomm has been very anti-FOSS (or open-anything--the pinout for the connector on the outdated Globalstar GSP-1600 satellite phone is STILL proprietary!) for as long as I can remember, so, yeah, they have this coming.
(Score: 0) by Anonymous Coward on Thursday July 16 2015, @08:28PM
How horrendous of them to actually invent tons of technology and be successful due to that How evil of them. If there's one way we should reward such companies its through investigations and fines.