EU Commission announced today its decision to fine the U.S. tech manufacturer Qualcomm €242 million, by setting prices below cost for two big clients, Huawei and ZTE with the objective of forcing the startup ICERA out of the chipset market. This behavior is illegal under EU Antitrust Law.
The decission adopted by the Commission today will support any action for damages caused by Qualcomm’s anti-competitive behaviour before national courts.
“In fact, in cases before national courts, a Commission decision is binding proof that the behaviour took place and was illegal,” underscored the Competition Commissioner Margrethe Vestager. Taking this into account, the predatory prices strategy could result even more expensive for Qualcomm at the end.
This is the second antitrust fine imposed on the mentioned US tech giant by the EU Commission. In 2018, the company was fined €997 million because it granted exclusivity payments. In both that case and the one considered today, Qualcomm’s objective was the same: to protect its dominant position in relation to baseband chipsets to shut out rivals.
The current case concerns baseband chipsets compliant with the 3G standard and mainly used in mobile broadband devices. the investigation found that Qualcomm blocked competition by applying predatory prices to protect its dominance against a new rising competitor, a stratup called ICERA.
ICERA was a small, growing start-up, which introduced its first baseband chipset to the market in 2006. ICERA’s chipsets became an attractive alternative to Qualcomm’s baseband chipsets, in particular those for data cards. And as a result, Qualcomm started seeing Icera as posing a “real threat” to its chipset business.
The investigation carried out by the EU Commisssion showed that Qualcomm identified the threat as “critical” in 2010. By then, Qualcomm not only had concerns about the growing success of Icera’s chipsets for data cards. It was also concerned that Icera would start offering 3G chipsets for smartphones.
ICERA’s success in the data card segment could serve as a springboard to allow it to compete in the far more significant and profitable segment of chipsets for smartphones.
To make sure that ICERA’s business could not reach a size that could endanger its market position, Qualcomm took what it described in internal documents as “preventive actions”. This meant offering very targeted price concessions to two strategically important customers, namely Huawei and ZTE.
The last time the Commission imposed a fine for such behaviour was 16 years ago. “But no matter how difficult and complex these cases are, we remain committed to fighting predatory pricing by dominant companies,” Vestager underscored.
Late decission for ICERA
The fine imposed by the EU Commission to Qualcomm comes late to save ICERA. There’s no possible remedy for the complaining company, despite they started off the competition procedure seeking for the effective protection against the obstructive predatory prices applied by the US. giant.
As a result of Qualcomm’s behaviour, ICERA did not make it as a self-standing competitor in the chipset industry. In 2011 it was bought by Nvidia, which decided to abandon the baseband chipset market a few years later.
“…procedural steps are a key part of the checks and balances that ensure the procedural fairness of our enforcement system. But they do take time. We have made progress in this mandate in expediting our anti-trust procedures. But that is a challenge that will also stay with us for the future,” recognised The EU Commissioner for Competition.
Vestager explains the reasons why the EU Commission fines Qualcomm
“Our investigation found that, during two crucial years for Icera’s development prospects, Qualcomm offered three of its leading edge chipsets at prices below cost to both these key customers. The prices set by Qualcomm did not allow it to cover its cost for developing and producing these chipsets.
“The evidence we have seen shows that this was done on purpose to prevent Icera from gaining a foothold in the market, at a time when Icera was Qualcomm’s main contender in the market segment of chipsets for data cards,” EU Commissioner for Competition Margarethe Vestager.
And she continued: “As a result of Qualcomm’s conduct, Icera was prevented from gaining reputation and scale as a supplier of chipsets for data cards and, ultimately, from entering the larger smartphone segment.
“…Qualcomm’s abusive behaviour also had a negative impact on innovation. By choking off Icera’s revenues from the 3G business, Qualcomm deprived Icera from the funds it needed to develop its chipsets for the next wireless generation, the 4G standard. Qualcomm did not demonstrate that its conduct created efficiencies that could justify it.
“In short, Qualcomm’s behaviour deprived consumers of a wider choice of technologies, and affected Icera’s ability to develop chipsets for the next wireless technology generations.”
“EU competition rules do not prevent dominant companies, like Qualcomm, from offering low prices to their customers. But dominant companies have a special responsibility not to impair competition in the internal market. They can sell at low prices but cannot sell below cost with the intention of eliminating a competitor. This is not competition on the merits.
“While such predatory pricing can lead to lower prices in the short term, consumers are worse off in the long run, once the victim of the predatory strategy is marginalised or leaves the market. A dominant company that is no longer challenged by competition will try to recoup what it has lost by raising prices and slowing down investments and innovation to the detriment of consumers,” Vestager explained.
Image over the headline.- Margrethe Vestager (EU Commissioner for Competition) during the press conference held today. Caption of the video of the press conference provided by the EU Commission.
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