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Qualcomm Slam “Meritless” US$270M Fine

US chipmaker Qualcomm will appeal a US$270 million fine after an investigation found the company engaged in predatory pricing between 2009 and 2011.

The European Commission’s Directorate General for Competition fined the company for selling its 3G baseband chips below cost to Chinese manufacturers ZTE and Huawei.

Commissioner Margrethe Vestager said in a statement Qualcomm did so to shut out its UK-based rival Icera.

“Qualcomm sold these products at a price below cost to key customers with the intention of eliminating a competitor.

“[The company’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.”

The Commission said Qualcomm’s market share in the Universal Mobile Telecommunications System chipset between 2009 and 2011 was around 60 per cent, and the company abused its dominant position to restrict competition.

According to the investigation, Icera was becoming a viable supplier and posed a growing threat to Qualcomm’s chipset business before the bigger player began targeting its business.

The Commission concluded Qualcomm’s pricing behaviour “had a significant detrimental impact on competition”, preventing Icera from competing, stifling innovation and reducing consumer choice.

Icera was bought by Nvidia in May 2011, who wound down the baseband chipset business in 2015.

Qualcomm said it plans to appeal the finding to the General Court of the European Union in a statement playing down the investigation.

“After a 10-year investigation, [the Commission] issued a finding that Qualcomm engaged in predatory pricing practices for some sales of three cellular baseband chipsets to two customers during a few calendar quarters between 2009 and 2011,” the statement read.

Qualcomm executive vice president and general counsel Don Rosenberg further insinuated the investigation had been a waste of resources, saying its findings posed “a novel theory” but were “meritless”.

“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.”

“The 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.

“On appeal we will expose the meritless nature of this decision,” Mr Rosenberg said.

The cost of the fine represents 1.27% of Qualcomm’s turnover in 2018.

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