EU probes Qualcomm on anticompetitive behavior

October 1, 2007: 11:25 AM ET

Qualcomm (QCOM), the second largest supplier of chips for cell phones, is under an intensifying investigation in Europe after complaints that it uses its influence in 3G phones to fleece suppliers and block competitors.

The European Commission, the same regulatory body that has brought antitrust charges against Microsoft (MSFT), Intel (INTC), Rambus (RMBS) and others, is conducting the probe. The commission says it will give the investigation high priority after two years with little action.

Some of the top names in wireless technology have lodged complaints against Qualcomm: they include Nokia (NOK), Texas Instruments (TXN), Broadcom (BRCM), Ericsson, NEC and Panasonic Mobile Communications.

The complaints have arisen because of Qualcomm technology in phones that operate on the fastest wireless networks. Rivals claim that Qualcomm's high licensing fees will limit the deployment of 3G technology, and that the company has blocked other manufacturers from entering its markets. Qualcomm says that's not true – the company points out that since rivals first brought their complaints in 2005, 3G deployments have grown and the price of 3G devices has fallen.

The rivals also claim that if other industry players had known that Qualcomm planned to charge so much for its WCDMA technology, they never would have agreed to include it in the UTMS 3G standard. They say Qualcomm's behavior now amounts to reaping benefits from the work of others.

"The proper functioning of standardization requires that companies whose patented technology is adopted into a standard commit to license these patents on fair, reasonable and non-discriminatory terms," said Tero Ojanpera, Nokia's chief technology officer. "Breaking these commitments compromises the whole standardization process, stifles innovation and harms consumers."

In a statement, Qualcomm President Steve Altman said the complaints from rivals have no merit, and are prompted by "commercial considerations."

A key question here is whether the European regulator will feel free to step in when one company gets the better of its competitors during contract negotiations. Qualcomm clearly does not wield the same kind of market dominance in 3G phones that Microsoft has in PCs; its influence comes mainly because a standards body agreed to use its technology.

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