EU hits Qualcomm with antitrust charge, says it plotted rival's demise

Qualcomm may have succeeded in the long run: Nvidia bought Icera in May 2011, only to close it down four years later

Qualcomm may have sold its chipsets below cost and then illegally paid a customer to use them in order to force competitor Icera out of business, according to two sets of antitrust charges filed Tuesday by the European Commission.

The Commission opened two investigations into Qualcomm's behavior in July, and has now filed formal charges, or "statements of objections," in each.

In the first, the Commission alleges that Qualcomm engaged in predatory pricing from 2009 to 2011, selling some chips below cost to hinder competition in the market for cellphone baseband chipsets, of which it is the world's largest manufacturer.

At the time, the Commission said, Qualcomm's market position was threatened by the arrival of a small, privately-owned rival, Icera, which made "soft modem" baseband chips capable of processing signals for multiple cellular standards.

"Qualcomm reacted to that threat by selling certain quantities of its UMTS baseband chipsets to two of its customers at prices that did not cover Qualcomm's costs, with the aim of forcing Icera out of the market," the Commission said Tuesday.

Qualcomm said the allegations concerned three chipsets incorporated into dongles used to provide cellular connectivity to laptops.

In May 2011, when Nvidia acquired the company for US$367 million, Icera was struggling to land customers and had yet to generate any cash, according to media reports at the time.

With Icera under new, richer ownership, Qualcomm changed tactics, the Commission alleged in its second statement of objections. It accuses Qualcomm of illegally paying a major customer to use its chipsets to the exclusion of rival vendors -- an exclusivity agreement that, it says, is still in force.

"Qualcomm has paid significant amounts to a major smartphone and tablet manufacturer on condition that it exclusively use Qualcomm baseband chipsets in its smartphones and tablets," the Commission said.

The deal harmed competition and innovation in the market for 3G and LTE baseband chips, the Commission said.

Whether as a result of that deal or other factors, Nvidia decided in May this year that it couldn't make money from Icera's soft modem chips, and closed down that part of its business.

Under EU law Qualcomm is constrained from abusing its position as the world's largest cellular baseband chipset vendor to restrict competition.

The Commission has notified Qualcomm of its charges, giving the company four months to respond to the predatory pricing allegations and three months to respond to those concerning the exclusivity contract.

Qualcomm General Counsel and Executive Vice President Don Rosenberg dismissed the allegations on Tuesday, saying that the company looked forward to demonstrating to the Commission that competition in the baseband chipset market has always been strong, and that the company has always complied with European competition law.

European antitrust authorities are not the only ones eyeing Qualcomm's past behavior suspiciously: The Taiwan Fair Trade Commission is investigating Qualcomm's patent licensing deals, the company said.

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Peter Sayer

IDG News Service
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