The European Commission has launched formal antitrust proceedings against U.S. chip maker Qualcomm after mobile phone manufacturers complained it charged far too much for vital technology licenses.
Nokia, Broadcom Corp, NEC Corp, Texas Instruments Inc, Matsushita Electric Industrial Co Ltd and Ericsson said in 2005 the licenses for Qualcomm's third-generation technology -- an essential component for high-speed phones -- were too expensive.
The Commission said on Monday it would conduct an in-depth investigation as a matter of priority although it set no deadline. Such probes can last months or even years.
The move had long been expected, but its announcement comes just two weeks after the Commission won a big victory in the EU's top court against U.S. software giant Microsoft.
European Commission spokesman Jonathan Todd said there was no link between the cases. The EU executive decided in August to launch the proceedings against Qualcomm but was only now able to make the announcement, he said.
The Commission in July charged Intel with using illegal competition tactics and charged another U.S. chipmaker, Rambus, in August for claiming unreasonable royalties.
The Commission said its Qualcomm move did not imply it had conclusive proof of any infringement by the company to date.
Qualcomm stock was down 0.9 percent at $41.87 at 11:40 a.m. EDT. The Philadelphia semiconductor index was up 1.1 percent.
At the heart of the Qualcomm case is the allegation by the phone makers that it broke an agreement to license patents on fair, reasonable and non-discriminatory terms.
Qualcomm President Steve Altman welcomed the continuation of our dialogue with the Commission in order to demonstrate that the complaints are without merit and are motivated by commercial considerations of the entrenched complainants.
In a statement, he accused the mobile phone makers of trying to stifle the competition that Qualcomm brings to the market.
The Commission may eventually scrap the probe, settle with Qualcomm or launch legal proceedings that could lead to a fine of up to 10 percent of the company's annual, global revenues.
The 2005 complaints said Qualcomm charged the same for its patents for new technology as it did for an older system, even though its patents accounted for much less of the new system.
The six phone producers issued a statement on Monday reiterating their allegations against Qualcomm, which they said was trying to exclude rival chip manufacturers from the market.
The complainants say overly high royalties could push up handset prices for consumers, hamper development of the 3G standard and lead to problems with future phone technology.
But Andrew Gilbert, head of Qualcomm Europe, said the development of new 3G devices had been swift and prices were falling, disproving the claims of the phone makers.
All of the worst fears of our opponents have been exposed as complete rubbish, he told Reuters in Helsinki.
Qualcomm is embroiled in multiple legal battles including a Fair Trade Commission investigation in South Korea and patent infringement cases with Broadcom and Nokia.
(Additional reporting by Tarmo Virki in Helsinki and Sinead Carew in New York)