EU fines chipmaker Qualcomm for 'predatory pricing'

In yet another European Union move against a U.S. tech company, the bloc's antitrust chief on Thursday fined chipmaker Qualcomm $271 million, accusing it of "predatory pricing" to drive a competitor out of the market.

EU Commissioner for Competition Margrethe Vestager, from Denmark, speaks at a news conference on an antitrust decision on Qualcomm at the European Commission in Brussels, Belgium, July 18, 2019. [Photo: EPA via IC/Stephanie Lecocq]

EU Antitrust Commissioner Margrethe Vestager said Qualcomm was abusing its market dominance in 3G baseband chipsets. She said it sold them below the cost of production to force startup Icera out of the market almost a decade ago.

"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.

Qualcomm is facing antitrust battles on multiple fronts. In the U.S., a federal judge ruled in May that Qualcomm unlawfully squeezed out cellphone chip rivals and charged excessive royalties to manufacturers such as Apple.

The Justice Department, however, has backed Qualcomm because of national-security concerns — it sees Qualcomm as instrumental to a politically sensitive "race to 5G" — a mobile network upgrade that could mean big technological changes. The U.S. is fighting for leadership over 5G with China, a tussle that has spilled over into the trade war. The U.S. has also punished Huawei, a Chinese tech company whose networking products are used in many countries, due to national-security concerns.

The Justice Department has asked for a pause on enforcement of the antitrust action while Qualcomm appeals the case. "Immediate implementation of the remedy could put our nation's security at risk, potentially undermining U.S. leadership in 5G technology and standard-setting, which is vital to military readiness and other critical national interests," the Justice Department said in a court filing Tuesday.

In Europe, Vestager said the chip market was too important to tolerate abuse by Qualcomm.

The fine of 242 million euros represents 1.27% of Qualcomm's 2018 revenue. The EU had already fined Qualcomm $1.23 billion last year after concluding it bribed Apple to stifle competition.

Qualcomm said it plans to appeal Thursday's fine to an EU court and denied the charges.

"This decision is unsupported by the law, economic principles or market facts, and we look forward to a reversal on appeal," Don Rosenberg, general counsel of Qualcomm, said in a statement.

"The Commission spent years investigating sales to two customers, each of whom said that they favored Qualcomm chips not because of price but because rival chipsets were technologically inferior," Rosenberg said.

Vestager said the opposite was true and that Qualcomm offered "very targeted price concessions" to two clients that were essential to Icera if it was to make a breakthrough in the market as Qualcomm's main contender from 2009 to 2011. Icera was based in Britain and was seen as a rival that could eventually threaten Qualcomm's dominance.

"It was done on purpose to prevent Icera from gaining a foothold in the market," Vestager said.

Icera was bought up soon after and its chip business disappeared.

The EU's fine against Qualcomm comes just a day after Vestager's office said it was investigating whether Amazon uses data from independent retailers to gain an unfair advantage, a decision that could lead to changes in how the internet's biggest marketplace works.

This week's moves echo similar antitrust actions against Google and Microsoft that have led to billions in fines. It also contrasts with U.S. lawmakers' slower approach to the issue, as they start discussing how to curb the growing power of the tech industry's titans.