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

chip

(Brian Kostiuk, Unsplash)

This article is brought to you in association with the European Commission.


The European Commission has fined Qualcomm €242 million for abusing its market dominance in 3G baseband chipsets. Qualcomm sold below cost, with the aim of forcing its competitor Icera out of the market. This is illegal under EU antitrust rules.

Commissioner Margrethe Vestager, in charge of competition policy, 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 antitrust rules, we have today fined Qualcomm €242 million.

Baseband chipsets enable smartphones and tablets to connect to cellular networks and are used both for voice and data transmission. This case concerns chipsets complying with the Universal Mobile Telecommunications System (“UMTS”), the third generation (“3G”) standard.

Today’s decision concludes that Qualcomm held a dominant position in the global market for UMTS 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.

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 Commission’s conclusion that Qualcomm engaged in predatory pricing during the period investigated is based on:

  • a price-cost test for the three Qualcomm chipsets concerned;
  • a broad range of qualitative evidence demonstrating the anti-competitive rationale behind Qualcomm’s conduct, intended to prevent Icera from expanding and building market presence.

The results of the price-cost test are consistent with the contemporaneous evidence gathered by the Commission in this case. 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. There was also no evidence that Qualcomm’s conduct created any efficiencies that would justify its practice.

On this basis, the Commission 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.

Consequences of the Decision

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

In accordance with the Commission’s 2006 Guidelines on fines (see press release and MEMO), the fine has been calculated on the basis of the value of Qualcomm’s direct and indirect sales of UMTS chipsets in the European Economic Area (EEA). The duration of the infringement established in the decision is two years.

The Commission has also ordered Qualcomm not to engage in such practices or practices with an equivalent object or effect in the future.

Procedural Background

The Commission opened its formal investigation on 16 July 2015. On 8 December 2015, the Commission sent a Statement of Objections to Qualcomm, setting out its preliminary concerns in this case. The Commission issued a Supplementary Statement of Objections on 19 July 2018, followed by a letter sent to Qualcomm in February 2019 setting out additional factual elements relevant to the final decision.

During its investigation, the Commission sought to obtain additional information from Qualcomm, which it requested in January 2017 through a simple letter and subsequently, due to the absence of a reply by Qualcomm, on 31 March 2017 through a formal Commission decision. On 13 June 2017, Qualcomm lodged an application with the General Court for the annulment of the Commission decision, together with an application seeking the suspension of the Commission decision or the adoption of interim measures. By order of 12 July 2017, the President of the General Court dismissed the application for interim measures (case T-371/17 R). By judgment of 9 April 2019, the General Court fully upheld the Commission decision (case T-371/17). On 18 June 2019, Qualcomm lodged an appeal for the annulment of the General Court’s judgment (case C-466/19 P).

Background

Article 102 of the Treaty on the Functioning of the European Union (TFEU) prohibits the abuse of a dominant position, which may affect trade and prevent or restrict competition in the Single Market.

In an entirely separate investigation,the Commission fined Qualcomm €997 million in January 2018 for abusing its market dominance in LTE baseband chipsets by making significant payments to a key customer on condition that it would not buy from rivals.

Fines imposed on companies found in breach of EU antitrust rules are paid into the general EU budget. However, the money is not earmarked for particular expenses, instead Member States’ contributions to the EU budget for the following year are reduced accordingly. The fines therefore help to finance the EU by reducing taxpayers’ contributions.

More information on this case is available under the case number 39711 in the public case register on the Commission’s competition website.

the sting Milestone

Featured Stings

Can we feed everyone without unleashing disaster? Read on

These campaigners want to give a quarter of the UK back to nature

How to build a more resilient and inclusive global system

Stopping antimicrobial resistance would cost just USD 2 per person a year

The three US financial war fleets

‘Moral obligation and political imperative’ to support Syria on path to peace: Guterres

Combatting terrorism: EP special committee calls for closer EU cooperation

Migrants and refugees face higher risk of developing ill-health, says UN report on displaced people in Europe

Veteran UN Syria Envoy to step down, pledges to work ‘until the last hour’ for peace

Dozens killed and injured by new airstrikes in western Yemen, UN coordinator condemns ‘outrageous’ toll

Cross-border cooperation: the EU Interreg programme celebrates 30 years of bringing citizens closer together

Commission adopts €4 billion investment package for infrastructure projects across 10 Member States

The EU resumes budget support assistance to the Republic of Moldova

EU Parliament approves CETA: the EU-Canada free trade deal sees the light in Trump’s gloomy era

Revamp collective bargaining to prevent rising labour market inequalities in rapidly changing world of work

Seize the opportunities of digital technology to improve well-being but also address the risks

The influence of the multilateral agreement on migrant health

Russia must urgently step up fight against foreign bribery

Achieving a European Education Area by 2025 and resetting education and training for the digital age

Light at the end of the Eurozone tunnel

European Business Summit 2015: In search of a vision for the future

The most unlikely innovators are changing ICT for development – it’s time we took notice

These photos show some of the world’s smallest things massively magnified

Harmonised Unemployment Rates (HURs), OECD – Updated: February 2020

Quality Education on the table at the European Parliament

We need to rethink neuroscience. And you can help us

State aid: Commission approves €300 million public support for the development of ultrafast broadband network in Greece

A long German political winter is on the way

Greece will probably stay in the Eurozone but at what cost?

The Parliament accuses core EU countries of exploiting their dominant political position

Visa facilitation and readmission: agreements with Belarus now in force

Microplastics, microbeads and single-use plastics poisoning sea life and affecting humans, says UN Environment

Busting the myths about coronavirus

Why education and accountability are important for developing countries?

Governments, businesses ‘walk the talk’ for investment in sustainable development: UN forum

Germany caught with selfish double standards in euro area policy

COVID-19 has hit Black Americans hardest. Healing this divide would lift the nation

“Be aware where you put your I Agree signature on and something else”; now Facebook by default opts you in an unseen private data bazar

Guterres lauds UN peacekeeping, highlights need to bridge ‘critical’ gaps

France pushes UK to stay and Germany to pay

The clothes of the future could be made from pineapples and bananas

COVID-19 not yet a pandemic, says UN health agency chief

Which EU countries have to correct their economic policies?

Mental Health in the COVID-19 era

EU fundamental rights under threat in several member states

Why income inequality is bad for the climate

What options the new President of Ukraine has?

“China is the only BRICS country to have either met or possibly slightly surpassed my expectations”, BRICS inventor Jim O’ Neil from Switzerland; the Sting reports live from World Economic Forum 2015 in Davos

The right approach to addressing overcapacity problem from a Chinese perspective

Sustainable Infrastructure and Connectivity in the Belt and Road Initiative (BRI): a stimulating China-EU dialogue at European Business Summit 2018

Three scenarios for the future of geopolitics

4 innovative renewable energy projects powering Europe’s green future

Media and entertainment in flux: it’s time for the close-up

FROM THE FIELD: Finding refuge in the ‘beautiful game’

Our tourism system is broken – time to customize

Jordan flash flooding: UN chief ‘saddened’ by loss of life

Is corporation tax good or bad for growth?

Impacting society with digital ingenuity – World Summit Award proclaiming the top 8 worldwide

VP McGuinness on women’s rights: “Not an option, but a duty”

Banks get trillions and the unemployed ECB’s love…

The Eurogroup protects Germany and blames others

How one traumatised child survived genocide and started a movement for mental health

United States: UN chief ‘deeply saddened’ by deadly California wildfires

New UN-Syrian Action Plan signals an ‘important day’ for child protection, says UN envoy

More Stings?

Advertising

Speak your Mind Here

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s