China imposes a fine of $975 million on US firm Qualcomm

Accused of abusing its dominance in wireless technology and charging manufacturers “unfairly high” licensing fees, US chipmaker Qualcomm has been fined 6 billion yuan or $975 million by the Chinese Cabinet’s National Development and Reform Commission (NDRC).

China is the world’s biggest producer of mobile phones and other wireless devices, and the country had often complained and even issued warnings to major companies to reduce the high costs of technology licenses – before the agency started off on several anti-monopoly investigations into the activities of business organizations serving the Chinese people and her global customers.

This imposed fine is the largest penalty slammed on a foreign company in China, and it doubles the 3 billion yuan or $492 billion slammed on British pharmaceutical company, GlaxoSmithKline, last year September over a bribery case.

In an effort to bring down the prices or fees that foreign automakers, or technology suppliers among others slam on indigenous companies, China’s NDRC two years ago commenced on several anti-monopoly campaigns against major companies operating in the communist nation.

But foreign companies in China complain that the manner the NDRC is conducting its investigations shows selective implementation against them, and that the secretive way the investigations are being done are alienating and disruptive, but China’s regulatory agency says this is never the case.

Based in San Diego, Qualcomm said it is disappointed with the penalty issued by China, but said it will not contest the issue. The NDRC accused Qualcomm of wrongly bundling unrelated licenses with mobile phone technology, to the point of forcing Chinese customers to pay for licences they’d never want or need.

“Qualcomm’s acts to eliminate or restrict market competition, hinder and inhibit technological innovation and development and harm the interests of consumers violate China’s anti-monopoly law,” the agency said in a statement.

“We are pleased that the investigation has concluded and believe that our licensing business is now well positioned to fully participate in China’s rapidly accelerating adoption of our 3G/4G technology,” said Derek Aberle, president of Qualcomm, in a statement while announcing that his company will offer its current 3G and 4G licenses to Chinese patents separately from those issued to others; and that it will give existing licensees in China an opportunity to adopt the new terms for sales of branded devices for use in China going back to Jan. 1.

Since Qualcomm earns most of its profit from the licensing fees paid by companies using its chips, the NDRC had calculated Qualcomm’s fine based on the 8% of revenue it made in China in 2013; meanwhile, China accounts for almost half of Qualcomm’s revenues.

Qualcomm is not the first foreign company to be fined for anti-monopoly activities in China. GSK was fined $492 billion, and 12 Japanese auto parts suppliers were fined $202 million in 2014 on accusation that they conspired to raise prices. Audi and Chrysler were fined for enforcing minimum prices dealers could charge for vehicles and service.

Five foreign dairy companies – one from Hong Kong, were fined in 2013 for enforcing minimum prices for distributors. Microsoft Corp. had also been penalized for the manner its Windows OS manages compatibility issues among others. But Daimler AG’s Mercedez Benz had once been accused of violating the laws but no penalty issued.

Source: Qualcomm