HomeInsightsEuropean Commission fines US chipmaker Qualcomm €242 million for engaging in predatory pricing

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On 18 July, the European Commission announced that it had fined US chipmaker Qualcomm €242 million for abusing its dominant position in the market for 3G baseband chipsets.

The Commission found that between mid-2009 and mid-2011 Qualcomm had engaged in predatory pricing by selling certain quantities of three of its UMTS chipsets below cost to Huawei and ZTE, two strategically important customers, with the aim of forcing its competitor Icera out of the market, at a time when Icera was becoming a viable supplier of UMTS chipsets providing high data rate performance, and therefore posed a growing threat to Qualcomm’s chipset business.

The Commission is based its conclusion on: a price-cost test for the three Qualcomm chipsets concerned; and a range of contemporaneous evidence demonstrating the anti-competitive rationale behind Qualcomm’s conduct.

According to the Commission, the targeted nature of the price concessions made by Qualcomm allowed it to maximise the negative impact on Icera’s business, while minimising the effect on Qualcomm’s own overall revenues from the sale of UMTS chipsets.

EU Commissioner for Competition, Margrethe Vestager, indicated that: “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. 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.” To read the Commission’s announcement in full, click here. A detailed statement by Commissioner Vestager on the decision is available here.

Qualcomm hit back immediately, indicating its intention to appeal the Commission’s finding to the EU General Court. Executive Vice President and General Counsel of Qualcomm, Don Rosenberg, stated that: “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”. To read Qualcomm’s announcement in full, click here.

Qualcomm has already appealed an earlier, unrelated, European Commission decision. In January 2018, the Commission imposed a fine €997 million on Qualcomm for abusing its market dominance in LTE baseband chipsets. Following a separate investigation, the Commission concluded that Qualcomm had prevented rivals from competing in the market by making significant payments to a key customer on condition it would not buy from rivals in breach of EU competition rules. To read the Commission’s announcement concerning this investigation, click here.

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