European Union regulators are investigating Qualcomm, the world's largest supplier of chips for mobile devices, for allegedly abusing its dominant position in the market to illegally disadvantage competitors.
The European Commission (EC)—the antitrust arm of the EU—announced July 16 that it is opening two investigations into Qualcomm's business practices in the region regarding its 3G and 4G chipsets that are used in such mobile devices as smartphones and tablets.
According to regulators, one of the investigations will look at whether Qualcomm offered financial incentives—such as payments or rebates—to device makers on the condition that they buy all or most of their baseband chips from the vendor. The other investigation will determine whether Qualcomm's business practices included charging prices for its products below costs in hopes of driving out competitors from the market, a practice called "predatory pricing."
The probes come as consumers increasingly rely on mobile devices for many of their computing and communications needs, according to Margrethe Vestager, the EU commissioner in charge of competition policy.
"We are launching these investigations because we want to make sure that high-tech suppliers can compete on the merits of their products," Vestager said in a statement. "Many customers use electronic devices, such as a mobile phone or a tablet, and we want to ensure that they ultimately get value for money. Effective competition is the best way to stimulate innovation."
If found in violation of EU antitrust policies, Qualcomm reportedly could be fined up to as much as 10 percent of its worldwide revenues and ordered to change its business practices. Qualcomm had almost $26.5 billion in revenue in its last fiscal year. There is no timetable for the investigation, according to EC officials.
Intel in 2009 was hit with a record $1.45 billion fine after European regulators found it had used its dominant position in the PC chip market to hurt rival Advanced Micro Devices' position in the European market and illegally reduce competition in the processor space.
In an emailed statement to new organizations, Qualcomm officials said they were disappointed European regulators had opened the investigations, but that they would cooperate.
"We continue to believe that any concerns are without merit," they said.
The EU investigations come five months after Qualcomm agreed to pay a $975 million fine and change its business practices in China to settle a lengthy antitrust investigation there. The company also has drawn the attention of regulators with the U.S. Federal Trade Commission as well as in South Korea.
They also add to several other investigations European regulators are conducting involving U.S. tech companies. The EC has launched antitrust charges against Google over allegations that the search giant is unfairly giving preferential treatment to its own shopping service—Google Shopping—over those of competitors. Regulators also want to know whether Ireland and Luxembourg unfairly benefited Amazon and Apple their tax codes.
The New York Times reported that the basis of the new allegations against Qualcomm stem from a complaint filed in 2010 by Icera, a British semiconductor company that Nvidia bought in 2011 to help it build out its 3G and 4G capabilities. Icera had complained that Qualcomm was unfairly using financial incentives to get new customers and harming competitors.