Qualcomm Faces 2 Antitrust Allegations in Europe

EU regulators say Qualcomm used predatory pricing and an exclusivity deal with a major OEM to push rival chip makers from the market.


Qualcomm continues to draw the attention of regulators worldwide.

The antitrust arm of the European Union (EU) is accusing Qualcomm—the world's largest mobile chipset vendor—of using its size and influence to illegally drive competitors from the market. At the same time, Taiwan's Fair Trade Commission is investigating to see if Qualcomm's licensing policies violate the country's fair trade laws

All this comes after Qualcomm in February agreed to pay a $975 million fine and change its business practices in China to settle a lengthy antitrust investigation there. The chip maker also has drawn the attention of regulators with the U.S. Federal Trade Commission as well as in South Korea.

The EU's European Commission (EC) on Dec. 8 accused Qualcomm of paying money to an unnamed top-tier smartphone and tablet maker to ensure that the customer use only Qualcomm's baseband chipsets in its mobile devices, a move that essentially hinders competitors' ability to negotiate with the OEM. Qualcomm's contract with the device maker that includes the exclusivity clauses is still active, commission regulators said.

In addition, the EC is claiming that between 2009 and 2011, Qualcomm sold some of its baseband chipsets at prices that came in below costs as a way of driving chip maker Icera from the European market. The predatory pricing came at the same time that Icera was becoming a strong competitor by offering better data rate performance, the regulators said.

The results of the business actions were that, as more people rely on their smartphones and other mobile devices for communication and Internet access, competition and innovation in a critical market—3G and 4G baseband chipsets—was being harmed, according to Margrethe Vestager, EU commissioner in charge of competition policy.

"Many consumers enjoy high-speed Internet on smartphones and other devices," Vestager said in a statement. "Baseband chipsets are key components that make this happen. I am concerned that Qualcomm's action may have pushed out competitors or prevented them from competing. We need to make sure that European consumers continue to benefit from competition and innovation in an area which is at the heart of today's economy."

Qualcomm executives were first notified of the EC probe in July, and were sent the EC's two Statements of Objections this month. The chip maker now has three months to respond to the allegation regarding the exclusivity payments and four months to respond to the predatory pricing allegations. Qualcomm can ask for an oral hearing in each case, according to the EC.

In a statement, Don Rosenberg, Qualcomm's executive vice president and general counsel, said the company disagrees with the allegations.

"We look forward to demonstrating that competition in the sale of wireless chips has been and remains strong and dynamic, and that Qualcomm's sales practices have always complied with European competition law," Rosenberg said.

European regulators have been aggressive in dealing with what they believe to be unfair business practices by major companies, including some in the tech space. Intel in 2009 was hit with a record $1.45 billion fine after the EC found it had used its dominant position in the PC chip market to hurt rival Advanced Micro Devices' position in the market and illegally reduce competition in the processor space.

Regarding the situation in Taiwan, Qualcomm officials acknowledged the investigation, noting that it is in the early stages and that they believe the vendor's patent licensing arrangements comply with Taiwan's Fair Trade Act.

The EU accusations and Taiwan investigation continue what has been a difficult year for Qualcomm, which included Samsung deciding not to use the chip maker's 64-bit Snapdragon 810 system-on-a-chip (SoC) in its new Galaxy S6 smartphone reportedly due to overheating issues. Qualcomm in September unveiled its new Snapdragon 820, which includes custom cores and is expected to power many of the smartphones coming to market in 2016, including some of Samsung's upcoming Galaxy S7.

At the same time, Qualcomm has been under pressure by activist investor Jana Partners to restructure its business—possibly by splitting in two and separating its licensing business from its chip-making efforts—and to return more money to shareholders. Qualcomm executives in July announced the company was slashing 15 percent of its workforce and making other changes to its operations.

Company executives said at the time that Qualcomm was being hurt by Samsung's rejection of the Snapdragon 810 and the dominance of Samsung and Apple of the high-end premium smartphone market, limiting Qualcomm's access to that lucrative space.