EU fines chipmaker Qualcomm $272M for ‘predatory pricing’

by Ike Obudulu Posted on July 18th, 2019

Brussels: Qualcomm Inc. was fined 242 million euros ($272 million) by European Union antitrust regulators for deliberately pricing some chips so low they could eliminate a smaller rival.

EU Antitrust Commissioner Margrethe Vestager said Thursday the U.S. company was abusing its market dominance in 3G baseband chipsets and said it sold below cost to force out a competitor.

Vestager said the market was too important to tolerate such abuse. She 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.”

She said the competitor was Icera.

The penalty comes a year after Qualcomm was ordered to pay 997 million euros for thwarting rival suppliers to Apple Inc. The EU said Thursday’s fine was 1.27% of Qualcomm’s revenue last year and “aimed at deterring market players” from trying the same thing.

The Qualcomm investigation targeted 3G chips for internet mobile dongles sold between 2009 and 2011. Regulators said these were sold below cost to Huawei Technologies Co. and ZTE Corp., “two strategically important customers,” in order to push Icera, now owned by Nvidia Corp., out of the market.

“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 EU said.

Companies have complained about the slow pace of EU antitrust enforcement in fast-moving technology markets. Icera sought to draw in the EU by filing a complaint in 2010. It was sold to Nvidia a year later in 2011. The EU opened an investigation four years after that.

Qualcomm said in a statement it will appeal and “expose the meritless nature of this decision.” It said it plans to provide a financial guarantee instead of paying the fine, until the courts have ruled.

“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,” Qualcomm’s general counsel Don Rosenberg said in the statement. “Contrary to the commission’s findings, Qualcomm’s alleged conduct did not cause anti-competitive harm to Icera.”

Nvidia didn’t immediately respond to a request for comment.

Apple Chips

Last year Qualcomm was handed the EU’s fifth-largest antitrust penalty over payments to Apple that the EU said were an illegal ploy to ensure only its chips were used in iPhones and iPads. San Diego-based Qualcomm is challenging the fine at the EU courts.

Qualcomm, the largest maker of chips for mobile phones, is unique among semiconductor makers in that it gets most of its profit from licensing patents. Makers of handsets pay the company royalties, whether or not they use its chips. That lucrative profit pool has come under attack as governments around the world scrutinized Qualcomm’s business practices.

Image: A sign on the Qualcomm campus is seen, as chip maker Broadcom Ltd announced an unsolicited bid to buy peer Qualcomm Inc for $103 billion, in San Diego, California, USA.

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