QUALCOMM, Inc. (NASDAQ:QCOM) Faces Chip Pricing Investigations by EU

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QUALCOMM, Inc. (NASDAQ:QCOM) is being probed by the European Commission for taking advantage of its market dominance and imposing unfair prices.

The European Commission initiated two official investigations to handle the case. This is not the first time the commission has investigated the chip maker. There is a previous case where Qualcomm was investigated on account of allegations of FRAND patent violation. The case was eventually closed, and no action was taken.

The recent probe will try to establish whether the company provided incentives to clients who used the Qualcomm chips on an exclusive basis thus generating an unfair advantage over the competition. The second investigation will establish whether the company sold its chips at predatory pricing to below the competitor pricing to eliminate the competition.

Qualcomm has been experiencing phenomenal success particularly with the sale of the 28nm generation chip. Its strong performance has been a preference especially to man Android devices. The enormous success has in turn attracted the attention of the EU which believes that there has to be a certain degree of unfairness in that kind of performance. The EU has a hard task ahead because it is generally hard to provide proof of anti-competitive practices. This is because low pricing may be as a result of competition. Additionally, the quality of the chips also plays a key role in attracting demand.

QUALCOMM, Inc. (NASDAQ:QCOM) maintains that it has not engaged in anticompetitive practices and that the claims brought up against it do not have any merit. Ironically, the company was found guilty of pursuing an anti-competitive patent bundling in China by the Chinese regulators five months ago. The regulators fined Qualcomm $975 million. If the company is found guilty by the EU, it could end up being fined heavily by as much as 10% of its overall revenue. The commission might also demand some changes in the company’s structure. Antitrust regulations have also been clamping down on major acquisitions and mergers in different industries to maintain fairness and healthy competition.

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