European Commission fines Qualcomm for predatory pricing
The European Commission has imposed a fine of EUR242,042,000
on Qualcomm for abuse of dominance through predatory pricing of its UMTS
chipsets between 2009 and 2011.
The Commission found that Qualcomm sold three of its UMTS
chipsets below costs to Huawei and ZTE, with the aim of eliminating Icera, its
main competitor at the time in a segment of the market offering advanced
performance.
The fine represents 1.2% of Qualcomm’s 2018 revenues. The Commission also ordered Qualcomm not to engage
in practices with a similar purpose or effect.
Predatory pricing occurs where a dominant company sells
below cost in order to eliminate competitors or deter entry, enabling it to
further increase its market power.
In AKZO the EU Court decided that:
• where
prices are below average variable cost, predatory behaviour is presumed;
• where
prices are above average variable cost but below average total costs, predation
is established if there is evidence of an attempt to eliminate a competitor;
• prices
above average total cost will not generally be predatory.
Predatory pricing is a difficult area to prove, not least
since the claimant will not have full visibility on the costs of the dominant
company so may be forced to rely on its own costs as a proxy. Such costs may not be comparable to those of
the dominant company where the complainant is not vertically integrated. Also, not every sale below cost will be
predatory because there may be an objective justification. Extensive cost data are required and there is
generally a need to establish at least some degree of intent to exclude a
competitor from the market or limit its growth.
Under EU competition law, unlike in the United States, there
is no legal requirement to show a serious probability of recoupment.
It appears that the Commission has concluded that Qualcomm
priced below its average total costs but higher than its average variable
costs. The traditional EU approach to predatory
pricing indicates that where that is the case, the Commission will rely on
internal documents to substantiate its theory of harm.
The case suggests that traditional antitrust enforcement tools
are still relevant even in dynamic and innovative markets.
Qualcomm (Predation) (Case AT/39711).
Commission press release IP/19/4350.
