Qualcomm Faces Antitrust Charges In Europe (nytimes.com)

An anonymous reader writes: Chipmaker Qualcomm is on the receiving end of an antitrust investigation in Europe, where officials say the company has abused its market dominance by offering financial incentives to device manufacturers to exclusively use Qualcomm chips. "Qualcomm was also accused of unfairly setting prices below manufacturing costs to force competitors from the market. ... If found to have breached Europe's antitrust rules, the chip maker could face fines amounting to about 10 percent of its annual global revenue, which was $26.49 billion in 2014, and could be required to change some of its business practices. In previous European antitrust cases, however, companies typically have not been asked to pay such high financial penalties."

Comments

Qualcomm holding Android back

[Anonymous Coward]

Google is worried enough about Qualcomm's lock on the market that they're looking to get in to the chip design biz.

Qualcomm really blundered their entry in to the 64bit mobile chip market with a part that is pretty much under constant thermal throttle. Google's also interested in implementing features that Qualcomm has no interest in putting in to their SoCs

Apple saw this coming years and years ago and went so far as to buy a chip design company so they could design their own SoCs in house. The result was beating everyone else to the 64bit market by two years (Apple shipped their 5s, a flagship device, in volume, ahead of the holiday shopping season.. Before anyone else was even sampling 64bit arm cores) Also, to this day, Apple's 2 core SoCs typically beat the quad and 4big/4small multi core parts in both performance and efficiency.

This year Apple REALLY has it down too. They've now got an in-house designed SoC AND it's now dual sourced, fabbed by TSMC or Samsung. Their own custom part, with two fabs fighting for their business.

It's easy to see why Google wants in on that.

Re:Qualcomm holding Android back

[erapert]

Apple's 2 core SoCs typically beat the quad and 4big/4small multi core parts in both performance and efficiency.

You mean that objective-C running on Apple's dual-core chips typically beats Java running on big/LITTLE quad cores.

Re:Qualcomm holding Android back

[Wootery]

Android apps are free to make use of native code if/when it's appropriate, no?

Re:Qualcomm holding Android back

[unixisc]

Google could just buy one of the chip companies. Is Freescale still around? What about TI or Marvell? In fact, if they wanted, they could even do a deal w/ MIPS and build a better CPU than ARM that is an optimal performance and power consumption b/w Intel and ARM

Re:Qualcomm holding Android back

[UnknowingFool]

Apple saw this coming years and years ago and went so far as to buy a chip design company so they could design their own SoCs in house.

I don't know if Qualcomm's lock on the market was one of the reasons Apple went into chip design as much as their frustration with the lack of choices when it came to mobile CPUs. The problem with Samsung and Qualcomm (and other maker) was that they design chips for a wide variety of customers and purposes. As such they were very generic chips. Customization of chips costs time and money. While Apple might have been willing to do that short term; it wasn't a long term strategy. Having gone through a similar conundrum with PowerPC, Apple decided that their best strategy was to eventually design their own.

For those that don't remember, Motorola and IBM designed some good PowerPC chips for Apple. The problem was that Apple would need new designs and lots of R&D every year to keep improving their computers. Neither Motorola nor IBM was willing to invest so much for one customer who at best would buy a few million chips a year and require new designs every when other customers would buy more and require less customization and change. This is why there was never a laptop G5.

As a contrast to Apple's situation, IBM designed the chip for the Xbox 360. Other than two die shrinks (which increase yield and lowers cost), it is basically the same chip in the last versions of the Xbox (2013) as when the console was launched in 2005. So 8 years with 80+ million units is what IBM would prefer from a chip designer's viewpoint.

With Samsung or any other chip maker, Apple would face the same exact problem. So they designed their own now. There were other benefits but Apple controlling their own fate when it came to chips is the main reason they did it.

Re:Qualcomm holding Android back

[Wootery]

Nothing 'essentially' about it: ART has a full JIT compiler. It certainly doesn't mean it's as fast as Objective-C, though.

We'd expect a relatively immature JIT like ART to be nowhere near as fast as a mature JIT like HotSpot, and we'd expect it to be completely crushed by C code compiled by a mature optimising compiler like GCC. I google'd this and it seems to be the case.

(Apparently we're not meant to say Dalvik any more, even to refer to the intermediate-representation, despite that ART runs the .dex code of Dalvik.)

Predatory pricing

[Anonymous Coward]

Qualcomm is being accused of predatory pricing. This is illegal in Europe but generally not in the US. This seems like an overly restrictive law that works against the best interests of consumers. There's a good reason why predatory pricing isn't generally against the law in the US. In order to be a profitable practice, there must be a sufficiently large price hike once the competition is forced out of the market in order to recoup their losses. This generally doesn't work. Once the prices are dramatically increased to recoup the losses, the market becomes very attractive to new competition that can make a profit while selling the product at lower prices. As long as there aren't barriers to entry that prevent competition from entering the market, predatory pricing is a losing strategy. However, businesses that attempt predatory pricing actually give consumers a bargain. If predatory pricing was effective, it would be employed far more commonly than mergers and acquisitions, which is a much more frequently used way to remove competitors from the market.

Walmart is another company that's been accused of predatory pricing and actually forced to raise their prices in Europe. If predatory pricing worked, Walmart should be able to defeat just about any competition in the US, where predatory pricing isn't illegal. That really hasn't happened, though. Many of their competitors are still alive and well. Many of the businesses that have gone under have failed not because of Walmart but because of competition like Amazon. If Walmart is really guilty of predatory pricing, they really aren't doing a good job of driving competitors from the market. That said, they are probably giving consumers somewhat of a bargain.

There are plenty of other chip manufacturers that will be happy to compete in the European market if Qualcomm raises their prices. If Qualcomm doesn't raise their prices, then consumers benefit from cheaper hardware. I don't see where the alleged predatory pricing actually hurts consumers. There aren't enough barriers to entry to make the alleged predatory pricing work. This seems like excessive regulation to me.

10 percent? OH NO!

[wardrich86]

the chip maker could face fines amounting to about 10 percent of its annual global revenue

Oh no! Ten whole percent!? What ever are they going to do with such sore wrists?

Re:10 percent? OH NO!

[Shinobi]

10% of their global annual revenue isn't just a slap on the wrist. For the fiscal year 2014 it'd be almost $2.7Bn, which would have the net effect of cutting almost a third of their profit, AND have the knock-on effect of their stock taking a dive too.

Global revenue?

[Anonymous Cow Ward]

Why does the EU think 10% of global revenue (not profits, mind you) is fair? Shouldn't that be based on revenue from the EU?

Re:Global revenue?

[UnknowingFool]

Because if the EU imposed that, Qualcomm should shift all of their "revenue" away from the EU. Suddenly it is counted as "Asian" revenue instead.

Re:Global revenue?

[Anonymous Cow Ward]

No, you can't shift revenue like you can shift profits - that's why I made the distinction. Shifting profits is relatively easy - you just make shell companies, license things around, etc. Revenue is just "money we got for something" - you can't really move that around in the same way.

Re:Global revenue?

[UnknowingFool]

You can't? I would bet you that given that challenge, someone would find a way.

Re:Global revenue?

[Xest]

Because it's meant to be a punishment and deterrent, not a pointless slap on the wrist that doesn't achieve anything.

The real question is why do you think it's unfair? If their practices have prevented a competitor in Europe from from getting in on the action to obtain profits in the global marketplace, then what's the problem with taking the infringers profits obtained in the global marketplace? They're only taking back what the infringing company potentially prevented Europe from obtaining from the global market place.

It makes sense to have this as a potential sanction for cases where it can be proven that Europe lost out due to illegal actions as it's a punishment that can be used to match the crime. Hurt European companies in the global marketplace, get hurt in the global market place, I don't see the unfairness here.

Re:Global revenue?

[Anonymous Cow Ward]

Well, potentially you could, but since most companies are taxed on profits and not revenues, there usually isn't much of an incentive to do so.

Re:Global revenue?

[Anonymous Cow Ward]

I think it's unfair because, if the EU thinks it has broken antitrust laws in Europe, penalize them for the amount of money they made in the EU. It could easily be a higher percentage of that money, but fining them based on their revenues in other areas of the world isn't fair. Consider a company that is huge in Asia but does very little business in Europe; assuming it broke EU laws, should it have to give up a lot of money it earned in Asia in compliance with local laws?

Also note, it's revenues, not profits. 10% of revenue is a considerably larger share of the profits.

With regards to your hypothetical company - how would their actions in the EU prevent a competitor from entering the global market? If the competitor can compete in the global market with the antitrust violations, but not in the EU, then they can still make money in the global market regardless, and it would only be fair to fine Qualcomm for the portion of revenues from the EU. If the hypothetical company could compete in the EU without the antitrust violations, but couldn't compete globally, it's the same result.

Re:Global revenue?

[Xest]

But it's not about what they've earned, that's not the point of the law. The point is to stop companies doing something that harm competition.

"With regards to your hypothetical company - how would their actions in the EU prevent a competitor from entering the global market? If the competitor can compete in the global market with the antitrust violations"

You have this completely backwards, if a company can compete regardless of the anti-trust violations then, great, but what if it can't compete because of the anti-trust violations? It means it's only option is to go out of business, withdraw to Europe where the violating competitor has been blocked from violating, or break the law itself. Neither of these options are fair, because it means that a law breaking company is getting away with breaking the law and harming Europe as a result such that either Europe gets poorer, or Europe also starts breaking the law and acting anti-competitively creating a race to the bottom which benefits no one.

Companies can act illegal if they want and not do business in Europe and not be subject to these penalties, but the EU is the world's single largest market, so the price of profiting from that market is to play by the rules, and if you don't, suffer the consequences.

No one is stopping Qualcomm from not paying the fine and withdrawing from the EU market place, but it wants to act illegaly and anti-competitively and still be able to exploit the European marketplace as well. Sorry, it doesn't work like that, it's a two way street.

What you're basically arguing is that companies should be free to fuck companies over with anti-competitive practices outside of Europe as long as they behave whilst within Europe. Sorry but why should we accept them in Europe at all if they're going to fuck over our companies with illegal practices outside of Europe? The other option is we block them from Europe altogether, and as the largest market that'll hurt them far more than a fine of global revenues for a year will - again, they can even choose this option for themselves if they wish.

Re:Global revenue?

[Anonymous Cow Ward]

No, if a company can't compete in other countries because of Qualcomm's alleged violations in the EU, then they wouldn't have made money in those other countries anyways. The EU should not be policing antitrust violations outside of the EU; that's just trying to be the world's policeman, and that's a bad thing (just like when America does it).

What you're basically arguing is that companies should be free to fuck companies over with anti-competitive practices outside of Europe as long as they behave whilst within Europe. Sorry but why should we accept them in Europe at all if they're going to fuck over our companies with illegal practices outside of Europe? The other option is we block them from Europe altogether, and as the largest market that'll hurt them far more than a fine of global revenues for a year will - again, they can even choose this option for themselves if they wish.

Yeah, I'm arguing that the EU shouldn't fine companies for things they do outside of the EU. That oversteps the EU's authority, just like the US routinely oversteps its authority by trying to legislate what US-based companies do in other countries. If Qualcomm did something illegal in China, the Chinese should punish it, not you. You're being pretty Eurocentric here (almost nationalist, but since the EU isn't a country, that's not quite the right word).

Re:Global revenue?

[Xest]

"No, if a company can't compete in other countries because of Qualcomm's alleged violations in the EU, then they wouldn't have made money in those other countries anyways."

Why not? If Qualcomm has amassed a fortune by cheating in the EU then it's bound to have an advantage outside of the EU because of all that wealth it has obtained and can use to strengthen itself elsewhere. For example, if there's a hot new startup in China, and Qualcomm has a billion pounds to bid to acquire it, but it's EU competitor only has £0.2bn because it didn't break the law, then who do you think will win the acquisition and grow and continue to have a bigger advantage? This isn't rocket science, cheating inside the EU most definitely benefits outside of the EU to the detriment of EU companies, it's nonsense to pretend otherwise no matter how much you may wish to clutch at straws on the issue.

The whole Swiss economy has historically been built around this idea, Switzerland is a wealthy country only because it acted as a haven for illegally obtained money through tax evasion, theft, and looting. It's banks were then able to loan Swiss companies like Nestle massive loans with ease to purchase foreign companies and become a giant and in turn trivially pay back those loans. It can turn around and say "okay we'll crack down on tax avoidance, evasion, and outright theft now using our banks" because the damage is already done - it's already used dirty money to grow it's indigenous companies to a level they would much less likely otherwise be able to achieve. By letting Swiss companies cheat, we effectively ended up seeing many other country's companies be taken abroad to Switzerland along with their profits as a result when we really should've been penalising Swiss companies and banks from the outset for using stolen money to grow.

"The EU should not be policing antitrust violations outside of the EU; that's just trying to be the world's policeman, and that's a bad thing (just like when America does it)."

There's a subtle difference between what you claim it's doing and what it's actually doing though, what you talk about does apply to America in many ways - America for example fined BAE, a British company for bribing Saudi Royalty to win a fighter deal. In this case the deal didn't touch the US - there was no wrongdoing by a US national, a US company, or on US soil - I agree that that's wrong because that really is a case of policing things outside your borders.

In this case, the wrongdoing happened within the EU, so the EU has every right to penalise it to whatever degree it sees fit. Consider this, you have a problem with the use of 10% of global revenues, what if they just said 100% of EU revenue when that might turnout to be 20% or more of global revenues? What if it just set a static figure that also was more than 10% of global revenues? It's really meaningless how you phrase it - the fundamental fact is the company broke the law within the EU, and the EU can set whatever financial penalty it wants on that and it's something a company must accept if they choose to do business in the EU. There's nothing extra-territorial about what the EU is doing, other than the fact they choose to use global revenues in their penalty statement, which could just as well be "unlimited fines" and implemented as equivalent of 10% of global revenue - you're surely not arguing the EU shouldn't be able to punish multi-national companies that do wrong within it's borders, so really all you're arguing about is language. The language can be changed, but the effect will be the same yet your argument will be nullified, hence why I think your argument is pointless - if mere wording nullifies your argument, then practically, it's not worth arguing, there's no substance to it, it's just pedantry at best.

I'm not being Eurocentric, because what I believe I believe applies to any jurisdiction. I do think the US takes it too far as with the BAE/Saudi deal - that certainly needed punishing, but it wasn't for the US to punish them. When the US only takes it to the extent the EU does I don't really see the problem - the same goes for China or any other.

Re:Global revenue?

[Anonymous Cow Ward]

Ah, but using the profits obtained by cheating in the EU to subsidize losses elsewhere (to gain monopoly share) would already be in violation of anti-trust laws in other places. I'll concede that the upper management might be content to receive lower profits from outside the EU if they were getting a lot within the EU, but I think abusing market position in, say, Japan, could be prosecuted there. Oh, Switzerland is dirty as hell, I agree - but that sort of thing is better handled using trade agreements, don't you think?

Of course, the EU can pass whatever laws it likes, and enforce them too - I'm saying it's wrong of them to do so. If they said 100% of EU revenue and that turned out to be 20% of global revenues, then I wouldn't have a problem with that. I mean, I think it's a little high, but at least it's based on demonstrable harm, rather than speculative losses outside the EU.

If an argument is about principles, not effects, then changing words isn't pedantry. You can get the same effect through two different means, and have one of them be good and the other bad.

Re:10 percent? OH NO!

[Anonymous Cow Ward]

Note that's 10% of revenue, not profits. That is a pretty large amount.