Qualcomm (NASDAQ: QCOM) may be facing an antitrust investigation from authorities in the European Union over allegations that it has abused its dominant market position, according to a report from Reuters.
The complaint against Qualcomm in the EU comes as Qualcomm finds itself mired in an investigation from Chinese authorities over patent disputes and so-called abuse of its dominant position. Chinese authorities, likely under orders from Beijing to make the environment hostile to American Qualcomm, are investigating whether Qualcomm holds monopoly power over key mobile technologies by refusing to license them to its Chinese competitors. Qualcomm, for its part, has said that some Chinese firms that license its technologies were behind on patent payments and others were refusing to pay a fair market price for the patents.
In the EU, the possible investigation stems from a four-year-old complaint from Nvidia (NASDAQ: NVDA). Details of the complaint are sealed, but it’s believed that the complaint revolves around allegations from Nvidia that Qualcomm was using anti-competitive tactics to price other chipset vendors out of the market. Nvidia, which at the time had just recently finished the purchase of UK-based baseband maker Icera, found itself unable to fairly compete in this market.
If found guilty of breaching EU rules, Qualcomm could face a fine of up to $2.5 billion.
Facing down the courts
There wouldn’t be many that disagree with the idea that Qualcomm is a dominant player in the global cellular baseband market. According to a report by Strategy Analytics, Qualcomm had a 64 percent revenue share in 2013, followed by MediaTek (TPE: 2454) with 12 percent revenue share and Intel (NASDAQ: INTC) with 8 percent revenue share.
But the problem with allegations that Qualcomm is abusing its dominant position in the market, is that many of its competitors simply cannot build a mobile SoC and baseband that’s competitive with Qualcomm. The mighty Intel is seemingly years behind Qualcomm. It’s SoFIA platform isn’t out yet, and it has to spend enormous amounts of money in “contra revenue” to convince vendors to take its silicon. This also partially applies true with Nvidia: the company announced earlier this year that it would substantially shift the focus of Tegra because it couldn’t find the consistent hardware wins it hoped for.
Of course, Qualcomm has a better chance of a fair trial in the EU than it does in China. Until then, allegations of abuse of its dominant position are merely allegations — brought forward by competitors that can’t build competitive silicon.
