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European Commission Accuses Qualcomm of ‘Predatory Pricing’

The European Commission formally notified Qualcomm Inc. Dec. 8 that the San Diego company may have broken antitrust laws in two instances, engaging in one case in what it called “predatory pricing” and abusing its position as the world’s No. 1 baseband chipset supplier.

Qualcomm (Nasdaq: QCOM) said it acted within the law and that it welcomes the chance to respond to the allegations over the next several months.

In the same Dec. 8 statement, the San Diego chipmaker said Taiwanese regulators were pursuing a fair trade investigation into the way Qualcomm licenses its patents. Qualcomm said it has acted within Taiwan’s fair trade act and pledged to cooperate with investigators.

Company shares lost more than 5½ percent of their value Dec. 8, closing at $49.48. The slide erased nearly all the gains the stock made in early December when Qualcomm announced its renewed licensing agreement with Chinese device maker Xiaomi.

“Under EU antitrust rules, dominant companies have a responsibility not to abuse their powerful market position by restricting competition,” the European Commission said in a Dec. 8 statement. “The sending of a statement of objections does not prejudge the outcome of the investigation.”

The commission said it came to the preliminary conclusion that Qualcomm illegally paid a major smartphone and tablet manufacturer to exclusively use Qualcomm baseband chipsets, adding that the contract is still in effect. The commission did not name the manufacturer.

Separately, the commission made the preliminary conclusion that between 2009 and 2011 Qualcomm sold chipsets to two customers below cost, with the aim of forcing competitor Icera out of the market, all in a potential breach of EU antitrust rules. Silicon Valley-based Nvidia Corp. bought U.K.-based Icera in May 2011. In May of this year, Nvidia (Nasdaq: NVDA) said it was getting out of the modem business.

In the latter case involving two customers, Qualcomm said it sold three chipsets that had been incorporated into dongles — that is, small USB devices used to provide laptops a way to exchange data using the cell phone network.

Qualcomm had previously told shareholders about the EU investigation.

“Qualcomm has been cooperating with the commission since the outset of these matters, and now that we’ve received the statements of objections, we welcome the chance to formally respond,” corporate general counsel Don Rosenberg said in a prepared statement.

“We look forward to demonstrating that competition in the sale of wireless chips has been and remains strong and dynamic, and that Qualcomm’s sales practices have always complied with European competition law.”

Qualcomm settled an antitrust case with Chinese regulators for $975 million in February. The company acknowledged in November that South Korean regulators were investigating the company for alleged anticompetitive practices. At the time, Qualcomm said the Korean allegations and conclusions were “not supported by the facts.”


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