Daily Management Review

Baseband Chip Manufacturer Qualcomm Under European Commission Scanner for Antitrust Violations


Baseband Chip Manufacturer Qualcomm Under European Commission Scanner for Antitrust Violations
Possible violation of Article 102 Treaty on the Functioning of the European Union would be the basis of twin investigations of antitrust and possible abusive behaviour by Qualcomm in the field of baseband chip sets used in consumer electronic devices.
The European Commission would investigate allegations against Qualcomm about alleged violation of rules that prohibits the abuse of a dominant market position by offering financial incentives to customers with the rider that the customers would exclusively or almost exclusively purchase the products from the company.
The Commission would also look into the allegations about Qualcomm trying to drive away any competition from the market of baseband chips by offering prices that were below the cost of production so that competition in the market is unable to stay afloat in terms of pricing and eventually fade away. This would have resulted in Qualcomm being the sole manufacturer and distributor of the baseband chip and would have had complete control of the market.
"We are launching these investigations because we want to be sure that high tech suppliers can compete on the merits of their products. 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,” EU Commissioner in charge of competition policy Margrethe Vestager said in a press release on Thursday.
The investigation assumes importance in face of the increasing number of European consumers accessing the internet through their smart phones. One of the key components for the mobile devices is the base band chip that is used both for voice and data transmission. The Commission is of the view that complete dominance by any one firm in the market of baseband chips would destroy competition among smart phone manufacturers and thus eliminate effective competition.
Qualcomm is the world's largest supplier of baseband chip sets and hence it can exert singular control the market through elimination of competition.
This is not the first time that allegations of antitrust had been levied against Qualcomm. On October 1, 2007, the European Commission had initiated an investigation against the company following allegations against Qualcomm that it was charging unreasonably high royalties from customers after its patented technology had become part of Europe's 3G standard.
The investigation however was subsequently closed in 2009 after all the complainants against Qualcomm were either withdrawn or complainants had indicated their intention to withdraw their complaints.
The allegations against Qualcomm is related to certain chipsets that comply with 3G (UMTS) and 4G (LTE) standards and are used to deliver cellular mobile connectivity in smart phones and tablets.

Article 102 Treaty on the Functioning of the European Union states that engaging in actions that have the potential to abuse a dominant market position and the resultant effect on trade between the EU Members is illegal. The use of unfair purchase or selling prices or other unfair trading conditions falls under the illegal actions under the Article.  

A Commission communiqué stated that the member states of the EU and their respective competition authorities have been informed about the beginning of the investigations.

(Source: http://europa.eu/rapid & www.streetindsider.com) 

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