Increasing Regulations on Dominant Market Position

In recent times, regulations and strict rules are getting tighter on unfair competitive practices and monopolistic market dominance by large organizations. The emergence of increasing numbers of start-ups that are creating new products and services, therefore, highlights the need for more awareness and information on how to avoid costly fines and regulatory scrutiny.

A recent occurrence in January this year saw a whopping $1.23 billion fine being handle down by the European Commission on Qualcomm which is currently the world’s largest manufacturer for smartphone chips, for establishing a partnership deal with Apple to become its only supplier of smartphone chips for a period of five years. The commission stated that Qualcomm’s strategic decision to establish exclusive supply right to Apple was unacceptable, as this reflects imposition and abuse of its current position as the world’s largest manufacturer of smartphone chips.

According to the European Commission which is the European Union’s executive agency charged with the duty of formulating and enforcing legislative policies, organizations that occupy dominant position are businesses that are so powerful that they can operate their business operations without putting the interest of customers, or competitors or suppliers into consideration. Therefore, when analyzing Qualcomm’s position, it was discovered that between 2011 and 2016, Qualcomm held about 90% of the total market for long-term evolution (LTE) baseband chipsets worldwide, while the demand from Apple accounts for one-third of the total demand due to the ever-increasing demand for iPhones and iPads by customers globally.

The European Commission is capable of imposing a maximum fine of 10% of the company’s revenue. However, this fine which is the third largest fine melted out on Qualcomm stood at about 4.9% of its worldwide revenue for 2017. In addition, the Commission also requested that Qualcomm does not enter into such deals in the future, on the other hand, Qualcomm responded by appealing against the decision while also kicking against the ongoing predatory pricing investigations.

This is not the only fine that has been slammed on large companies by the European Commission for market abuse, Google was fined about $2.99 billion in 2017 for unfairly leveraging on its search engine to sell its own shopping service, over other competitors while still charging these competitors. The European had earlier fined another tech giant, Intel, about $1.31 billion for coercing customer into buying all their chips from Intel. It is also noteworthy to mention that the U.S. Federal Trade Commission also fined both Intel and Google after scrutinizing them for anti-trust practices, an agreed amount was paid for settlement and the U.S. Federal Trade Commission has launched similar investigations against Qualcomm to determine if it had also breached the anti-trust laws.