Friday, 19 July 2019 08:56

EC hits Qualcomm with $385m fine for abusing market dominance Featured

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EC hits Qualcomm with $385m fine for abusing market dominance Courtesy Qualcomm

The European Commission has hit American processor maker Qualcomm with a €242 million ($385.6 million) fine for abusing its market dominance in 3G baseband chipsets.

In a statement on Thursday, the EC, the executive arm of the European Union, said Quantum had sold products below cost in a bid to force its competitor, Icera, out of business, an act that was illegal under Eu anti-trust rules.

This is the second fine levied on Qualcomm in successive years. Last year, the EC fined Qualcomm €997 million (A$1.53 billion) for abusing its market dominance in LTE baseband chipsets.

In Thursday's statement, EU competition commissioner Margrethe Vestager said: ""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. Since this is illegal under EU anti-trust rules, we have today fined Qualcomm €242 million."

Earlier this year, Qualcomm and Apple settled all pending litigation between the two companies, a deal which also included a payment from Apple to Qualcomm, the amount of which was not disclosed.

The two companies also said they had reached a six-year licence agreement, effective from 1 April, which included a two-year option for extension and a multi-year chip supply deal.

In its statement, the EC said while market dominance was not illegal in the EU, dominant companies had "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".

It said investigations had found that Qualcomm abused its dominance between mid-2009 and mid-2011 through 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," the EC said.

"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."

Qualcomm said it would appeal the finding in the EU's General Court.

“The Commission spent years investigating sales to two customers, each of whom said that they favoured Qualcomm chips not because of price, but because rival chipsets were technologically inferior," said Don Rosenberg, executive vice-president and general counsel of Qualcomm.

"This decision is unsupported by the law, economic principles or market facts, and we look forward to a reversal on appeal.

“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.

"Contrary to the Commission’s findings, Qualcomm's alleged conduct did not cause anti-competitive 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 co-operated with Commission officials every step of the way throughout the protracted investigation, confident that the Commission would recognise that there were no facts supporting a finding of anti-competitive conduct. On appeal, we will expose the meritless nature of this decision.”

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Sam Varghese

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Sam Varghese has been writing for iTWire since 2006, a year after the site came into existence. For nearly a decade thereafter, he wrote mostly about free and open source software, based on his own use of this genre of software. Since May 2016, he has been writing across many areas of technology. He has been a journalist for nearly 40 years in India (Indian Express and Deccan Herald), the UAE (Khaleej Times) and Australia (Daily Commercial News (now defunct) and The Age). His personal blog is titled Irregular Expression.

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