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EU Competition Commissioner Levels Charges Against Qualcomm

In yet another high-profile enforcement action, last week EU Competition Commissioner Margrethe Vestager announced charges against Qualcomm Inc., a world leader in 3G, 4G, and next-generation wireless technologies and the world’s largest supplier of baseband chipsets, for allegedly abusing its dominant position in the baseband chipset market.  The Commission preliminarily concluded that Qualcomm illegally paid a major customer to exclusively use Qualcomm chipsets, and also engaged in predatory pricing by selling chipsets below cost with the aim of forcing a competitor out of the market.

We have previously reported on Commissioner Vestager’s aggressive antitrust enforcement actions in the technology industry.  Over the past year, the Commission has commenced formal investigations into such tech heavyweights as Amazon and Google.

Continuing that trend, the Commission commenced this formal investigation into Qualcomm in July.  In remarks shortly after the investigation began, Commissioner Vestager stressed the importance of requiring tech suppliers to compete on the merits of their products.  In its announcement last week, the Commission echoed those sentiments, noting that consumers increasingly access the Internet through mobile devices and, accordingly, it is critical to safeguard effective competition for the supply of key components of these devices.

Qualcomm earns a significant percentage of its profits by licensing patents to mobile technology manufacturers.  The Commission’s preliminary conclusions allege that, since 2011, Qualcomm has made unlawful payments to a major smartphone and tablet manufacturer in exchange for the assurance that the company would exclusively use Qualcomm baseband chipsets in its smartphones and tablets.  The Commission claims that this conduct has reduced the manufacturer’s incentives to source chipsets from Qualcomm’s competitors and, thus, has harmed competition and innovation in the markets for these products.

The Commission’s preliminary conclusions also allege that Qualcomm engaged in predatory pricing in violation of EU law.  According to the Commission, Qualcomm was concerned by the threat of competition from Icera, Inc., an emerging competitor in the baseband chipset market.  The Commission alleges that, between 2009 and 2011, Qualcomm sold its 3G baseband chipsets to customers at prices below cost in an effort to force Icera out of the market.

The Commission’s charges came just as the Taiwan Fair Trade Commission announced a new investigation into whether Qualcomm’s patent licensing arrangements violate the Taiwan Fair Trade Act.  Qualcomm faces similar charges in an investigation by the South Korean Fair Trade Commission.  The United States Federal Trade Commission also has an ongoing probe into Qualcomm’s business practices.

In remarks to the European Parliament last year shortly before she took office, Commissioner Vestager vowed to take an active role in monitoring competition in the technology sector.  With the charges against Qualcomm, it appears that aggressive antitrust enforcement by EU regulators against technology companies is not going away any time soon.