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US semiconductor giant next to feel the force of China’s NDRC in antitrust dawn raids

    • Competition, EU and Trade

    16-12-2013

    The National Development Reform Commission (“NDRC”), the Chinese agency responsible for price related competition law infringements, has carried out a series of dawn raids at a number of Qualcomm’s Chinese offices looking for evidence of practices amounting to an abuse of dominance.

    Qualcomm, the US semiconductor giant and one of the world’s largest chipmakers for smart phones, is the latest in a number of international companies to come under investigation by the Chinese antitrust authorities as China steps up its scrutiny of foreign multinationals to crack down on anti-competitive practices that lead to higher consumer prices.

    Whilst Qualcomm has stated that the details of the raid are confidential, it has confirmed that the NDRC carried out unannounced investigations at a number of its offices in the PRC. Qualcomm has also stated that whilst it is not aware of any charge by the NDRC that it has violated the AML, it continue to cooperate with the NDRC as it conducts its investigation.

    While most of the details surrounding the raids are currently confidential, it appears that the NDRC is looking at possible price manipulation by Qualcomm and suspected abuse of dominance in negotiations with Chinese phone makers and service providers over patent licensing, especially in relation to construction of the 4G network. China is Qualcomm's biggest market, contributing almost half of its US$24.9 billion revenue, and is also the world's largest mobile phone market with more than 1.2 billion mobile service subscribers.

    The timing is also fascinating as the investigation into Qualcomm coincides with the launch of China’s own 4G Long Term Evolution Networks. After three years of testing, the government has given its approval and has issued 4G mobile network operating licences to China’s three main state owned carriers: China Mobile (the world’s largest mobile carrier), China Unicom and China Telecom. This has led to reports that Qualcomm’s efforts to broaden the market for its technology and chips in China may have triggered a probe by the Chinese government into its practices. The PRC is trying to build up its own local chip industry capable of competing with overseas suppliers such as Qualcomm, now that it has a more advanced network infrastructure in place.

    The investigation follows a recent announcement by the NDRC that it will clamp down on monopolistic pricing practices in sectors relating to telecommunications, consumer chemical products, vehicles, pharmaceuticals and home electric appliances. It also comes hot on the back of recent enforcement action against six foreign producers of baby milk formula for price-fixing and against two famous Chinese state-owned producers of premium liquor.

    It will be extremely interesting to see how the investigation into Qualcomm, and the biggest series of dawn raids by the NDRC to date, progresses...

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