Qualcomm claims the biggest penalty in China's antitrust history

After a 14-month antitrust investigation, the National Development and Reform Commission announced the results of its investigation into the US chip giant Qualcomm Corporation on February 10. For Qualcomm companies to abuse the market dominance of the monopoly to eliminate, limit competition, the law enforcement agencies in order to stop the illegal activities of Qualcomm, the company in accordance with the law of 2013 in China's market sales of 8% of the fine, a total of 6.088 billion yuan (about 975 million U.S. dollars). It is understood that this amount of money again to refresh China's antitrust fines record.

NDRC: Fine not to break down the enterprise

After a survey of dozens of domestic and foreign handset manufacturers and baseband chip manufacturers, the national Development and Reform Commission pointed out the "three crimes" of the abuse of market dominance by Qualcomm: the charging of unfair high patent license fees, the necessary patent license for tying non-wireless communication standards, Three abuses of market dominance, such as unreasonable conditions attached to base-band chip sales.

Qualcomm is the global leader in wireless communication technology, and has a dominant position in the CDMA, WCDMA and LTE wireless communication standards and the market for baseband chips. It has a number of core patents, the main profit from the licensing fees, which is Qualcomm's most core business model. The vast majority of Android smartphones currently on the market are using their chips.

Industry insiders pointed out that Qualcomm over the years to the domestic handset manufacturers by 5% of the price of the machine to receive unreasonable patent license fees, the industry called "high-pass tax." In November 2013, the National Development and Reform Commission launched an antitrust investigation of Qualcomm on the basis of a report.

The 6.088 billion-dollar fine has refreshed the NDRC's antitrust ticket record, which is more than three times times the total anti-monopoly fines of the NDRC in 2014.

For such a hefty fine, the NDRC said it was mainly because of the seriousness, depth and length of the high pass monopoly. "The penalty is to restore a competitive order in this field and not to crush any business," said Hucunlin, director of the National Development and Reform Commission's price supervision and antitrust Bureau, in a news briefing yesterday. Past Qualcomm's actions have curbed others ' innovation.

Analysis says the impact on Qualcomm is limited

Qualcomm issued a notice to accept the Chinese national Development and Reform Commission's decision to punish its 6.088 billion yuan, and pay fines as scheduled, no longer seek further legal procedures. Qualcomm's president, Derrick Aboli, said yesterday in a telephone connection with the Chinese media that it was happy to reach a final agreement with China's Development and Reform Commission, which will continue to invest in China and strengthen cooperation with operators and terminal partners. At the same time, he stressed that "the rectification plan is only for Qualcomm in the Chinese market authorized units, patent anti-licensing is only applicable to the Chinese market."

According to the NDRC, the company offered to propose a package of corrective measures, including the sale of mobile phones for use in our country, by 65% of the wholesale net selling price of the whole machine to receive a patent license fee; The patent list shall be provided when the patent license is granted to the licensee of our country We do not require the licensee to have the patent for free reverse license.

As for the amount of the ticket, Hucunlin said at the briefing that the initial Qualcomm thought the fine was a bit heavy, but we thought it was reasonable and eventually Qualcomm accepted that the fines were calculated on the basis of the National foreign exchange administration's average exchange rate.

Analysis said that the 6.088 billion-yuan fine for Qualcomm's short-term performance, although the impact, but in the long run, the impact on Qualcomm is limited. According to the latest earnings, Qualcomm's current cash and cash equivalents are as high as $31.6 billion trillion, and close to $1 billion trillion fines will not be too much pressure on Qualcomm. In terms of performance, the impact is limited, and even bring positive. Yesterday Qualcomm raised its revenue and profit forecasts for fiscal year 2015. "The adjustments we are making now reflect the gradual elimination of the uncertainties, but the expected ceilings remain unchanged," he said. "Derrick Aboli said.

After the news, Qualcomm's share price rose by 2.82% in Monday in the New York market after trading, with Qualcomm's shares up 1.15% per cent by the end of Monday.

The National Development and Reform Commission said it welcomed the continued investment by Qualcomm in the country and supported Qualcomm to charge a reasonable royalty fee for using its patented technology.

Explanation

Why are you fined 8% of sales?

According to China's anti-monopoly law, the abuse of market dominance can be punishable by a fine of 10% of the previous year's sales, before the industry expected to fine or press 10% of the standard "shelf treatment." Hucunlin yesterday said, "Qualcomm is cooperating with our investigation, the company president repeatedly to communicate with the NDRC, based on this, we did not according to 10% of the highest standard penalty, but reduced by 2%, according to 8% of the standard to punish".

For the question of how to charge the fine, the NDRC's deputy director of the price supervision and inspection and antitrust bureau, Lu Yanchun, said to the media that, in accordance with the law, from the date of the issuance of formal punishment from 15th, Qualcomm will pay the fine to the central government.

Wang Xiaoquan, deputy director of the policy advisory department at the National School of Administration, told The Beijing News correspondent that the fine could be used for special funds or general financial expenses after it was handed over to the central government, but it was not clear how it would be used.

Experts in the industry also said the fines should be charged into the Treasury and become the revenue component of the public budget. But revenue and fiscal spending are two lines, and the details of the final spending on the money are really hard to count.

Back in the past antitrust cases, such as milk powder, liquor, tablet computers, medicine and other industries, the ultimate "end-result" of antitrust fines is so. For example, the highest fines for dairy companies were previously in August 2013, the NDRC said, "The United States, the United States, the U.S., Abbott, Rich orchid, Fonterra and other 6 enterprises have been a total of 668.73 million yuan fines into the Treasury designated the price confiscated income account, all turned over to the central Treasury." (Liu Suhong)

Review

Qualcomm 28 times Contact NDRC

At the National Development and Reform Commission in the morning of the ventilation meeting, the Price Supervision Bureau Director Hucunlin introduced the NDRC investigation Qualcomm details, said the NDRC and Qualcomm company conducted 28 communication, of which Hucunlin and Qualcomm President successively carried out 8 meetings.

Over the past year, Qualcomm and the NDRC have been keen to discuss the case, and Derrick Aboli, the president of Qualcomm, has repeatedly led executive and legal teams to visit China.

According to foreign media disclosure, throughout 2014, Qualcomm Global chief executive Steve Morenkopf at least three degrees to exchange views, Qualcomm Global CEO led seven or eight Vice President 5 times to receive inquiries, Qualcomm even used to include the U.S. Treasury Secretary, U.S. Commerce Secretary and other senior U.S. officials lobbied, and meet the State Council Deputy Prime Minister and the Director of the Antimonopoly Committee Wang Yang and other high-level.

Yesterday, in a telephone connection with Chinese media, Qualcomm President Derrick Aboli said it was a pleasure to announce that we could finally reach a solution with the National Development and Reform Commission. This survey has brought a lot of uncertainty to our business in China over the past year. We are glad this investigation is over and we can start a new chapter.

"While the final solution contains some areas that we feel somewhat regretful about, we have more certainty in our licensing business in China," he said. I am pleased that the NDRC has agreed to accept our rectification plan and recognize the requirements of the NDRC's decision. Now we can operate in China with less uncertainty. "Derrick Aboli said.

Although Qualcomm was fined close to $6.1 billion to refresh China's antitrust record, analysts say the fine is not high for Qualcomm. (Lin Chiling)

National Development and Reform Commission antitrust ticket history

November 2011 Shandong Shun Tong and Shandong Huaxin Two pharmaceutical enterprises were issued 7 million fines, this is the national Development and Reform Commission price Supervision and Inspection Division renamed the price Supervision and inspection and antitrust bureau, issued the first ticket.

January 2013 Korea Samsung, LG, China Taiwan region Chi Mei, friends, such as six large panel manufacturers, because in the Chinese mainland monopoly LCD panel price, the NDRC was fined a total of 353 million yuan.

February 2013 Maotai and Wuliangye due to the implementation of price monopoly by the development and Reform Commission fined 449 million yuan.

August 2013 Together Sheng Yuan, the United States, more than the United States, Abbott, Rich orchid, Fonterra, and other six vertical monopoly of the price of milk powder production enterprises were fined 670 million yuan.

August 2013 in accordance with the National Development and Reform Commission price Supervision Bureau, the Shanghai Municipal Price Bureau of Shanghai Gold Jewelry Industry Association and the old Fung Xiang and other parts of the price monopoly, the total amount of fines of 10.5937 million yuan.

In September 2013, Sanya, Hainan, three sales of crystal tourist shops concluded a price alliance, the amount of fines of more than 5 million yuan. Yunnan Lijiang 8 Large Travel Service group in the Lijiang City Tourism Association Travel branch of the lead organization to conclude a price alliance, the total fine of 3.346 million yuan.

May 2014 in accordance with the road, Dr. Lun, such as five eye lenses manufacturers due to price monopoly, a total fine of more than 19 million yuan.

August 2014 Japan's 12 auto parts, bearing manufacturers due to price monopoly, a total of 1.2354 billion yuan fined.

September 2, 2014, Zhejiang Province insurance industry for commercial Insurance agency fees and other negotiated prices, the participants were fined 110 million yuan.

September 9, 2014 Yatai, North, Jidong three cement enterprises for the implementation of price monopoly, was fined 110 million yuan.

September 11, 2014 after the National Development and Reform Commission confirmed monopolistic behavior, Hubei Price Bureau of FAW-Volkswagen sales Company and Hubei 8 Audi dealers fined about 280 million yuan. The Shanghai Development and Reform Commission has fined about 33.82 million yuan for Chrysler (China) Automobile Sales Co., Ltd. and some distributors in Shanghai area.

February 10, 2015, the abuse of market dominance by Qualcomm companies to eliminate the monopoly of competition, the law to deal with, ordered Qualcomm to stop the relevant violations, a fine of 6.088 billion yuan.