The European Commission has had no qualms in recently fining the world’s largest supplier of baseband chipsets, the grand sum of €242 million for abusing its dominant position on the relevant market. Predatory pricing is in breach of the EU’s antitrust rules and will be punished accordingly, the Commission has affirmed.

The EU’s antitrust rules clearly prohibit any abuse by undertakings of a dominant position on the relevant market when such abuse may effect trade between member states and prevent or restrict competition in the EU’s single market. Though market dominance is, as such, not illegal, dominant companies have a special responsibility not to abuse of their powerful market position by restricting competition, either in the market where they are dominant or in separate markets. One such form of abuse is predatory pricing, that is, in simple terms, the selling of products below cost.

In the course of its investigations, the Commission concluded that the infringer, Qualcomm, held a dominant position in the global market for UMTS baseband chipset – key components which enable mobile devices to connect to the internet – for the period between 2009 and 2011. This was evidenced not only by its high market shares of approximately 60 per cent, almost three times the market share of its biggest competitor, but also by the high barriers to entry to this market. These included the significant initial investments in research and development to design UMTS chipsets and various barriers related to Qualcomm’s intellectual property rights.

The Commission took into consideration the duration and gravity of the infringement

In its findings, the Commission highlighted the fact that Qualcomm sold certain quantities of three of its UMTS chipsets below cost to Huawei and ZTE, two strategically important customers, with the intention of eliminating Icera, its main rival at the time in the market in question. In reaching its conclusions, the Commission based itself on a price-cost test for the three Qualcomm chipsets concerned as well as on a broad range of qualitative evidence demonstrating the anti-competitive rationale behind Qualcomm’s conduct, intended to prevent Icera from expanding and building market presence. In fact, Qualcomm engaged in such predatory pricing at a time when Icera was becoming a viable supplier of UMTS chipsets providing high data rate performance, thus posing a growing threat to Qualcomm’s chipset business.

The Commission hence concluded that Qualcomm’s conduct prevented competition and innovation in the relevant market and limited the choice available to consumers in a sector with a huge demand and potential for innovative technologies.

In imposing the fine in question, the Commission took into consideration the duration and gravity of the infringement. The fine was calculated on the basis of the value of Qualcomm’s direct and indirect sales of UMTS chipsets in the European Economic Area (EEA) and the amount imposed also served the objective of deterring market players from engaging in such anti-competitive practices in the future.

Freedom of choice for consumers is invariably a factor which determines the outcome of the Commission’s anti-trust investigations. In a world where consumers increasingly use their mobile devices to access the internet, it comes as no surprise that the Commission deemed it essential to ensure effective competition in the market of one of the key components which enables such activity. Any form of abusive conduct undertaken by dominant companies which seeks to stifle innovation and competition in the relevant market will therefore always be frowned up by the EU’s competition watchdog.

Mariosa Vella Cardona M’Jur, LL.D., is a freelance legal consultant specialising in European law as well as competition law, consumer law, data protection law and intellectual property law. She is also a visiting examiner at the University of Malta.

mariosa@vellacardona.com