Fine for Qual­comm fair for the mar­ket

China Daily (Canada) - - FRONT PAGE -

Crit­i­ciz­ing the 6.088-bil­lion-yuan ($975 mil­lion) fine im­posed on chip­maker Qual­comm for vi­o­lat­ing China’s mo­nop­oly laws, someWestern me­dia out­lets say it shows that for­eign cap­i­tal is less wel­come in China to­day. This ob­vi­ously is not the case.

The fine im­posed on the US-based com­pany by the Na­tional Devel­op­ment and Re­form Com­mis­sion may be huge, but the legal ac­tion was ab­so­lutely nec­es­sary to es­tab­lish fair com­pe­ti­tion in the mar­ket.

Since Qual­comm has vi­o­lated the Anti-Mo­nop­oly Law, the NDRC has also di­rected it to col­lect roy­al­ties on 65 per­cent of the sell­ing price, in­stead of the full price, of mo­bile phones, and of­fer li­censes for its 3G and 4G patents to Chi­nese main­land com­pa­nies, separately from its other patents.

Th­ese mea­sures will prompt Qual­comm to adopt a fair busi­ness model, warn other com­pa­nies not to in­dulge in mo­nop­oly ac­tiv­i­ties and even­tu­ally help cre­ate con­di­tions for open com­pe­ti­tion and to pro­tect the in­ter­ests of down­stream man­u­fac­tur­ers and cus­tomers.

Be­cause of its many patent rights and mo­nop­oly prac­tices, Qual­comm com­pelled com­pa­nies that bought its cell­phone chips to pay the patent fees re­peat­edly.

By vi­o­lat­ing the prin­ci­ple of fair­ness and mak­ing prof­its by us­ing its tech­no­log­i­cal ad­van­tage, theUS com­pany has not only un­der­mined the in­ter­ests of cell­phone man­u­fac­tur­ers, com­mu­ni­ca­tion equip­ment mak­ers and com­mu­ni­ca­tion ser­vice providers at home and abroad, but also made it dif­fi­cult for other chip­mak­ers to de­velop their po­ten­tial. Worse, the ex­or­bi­tant patent fees and prices charged by Qual­comm have been passed down to cus­tomers.

Ac­cord­ing to Qual­comm’s “re­verse patent li­cense” per­mis­sion, man­u­fac­tur­ers that use its chips should al­low Qual­comm to use their patent free. Such despotic prac­tices al­lowed Qual­comm to not only make high prof­its, but also block other com­pa­nies’ mar­ket op­por­tu­ni­ties.

Qual­comm’s mo­nop­oly ac­tiv­i­ties de­serve se­vere pun­ish­ment. At a closed-door con­fer­ence at the In­sti­tute of Elec­tri­cal and Elec­tron­ics En­gi­neers in Bei­jing on Au­gust, 2014, Qual­comm was boy­cotted by com­pa­nies such as In­tel, Mi­crosoft andHuawei, and the con­fer­ence ended up with Qual­comm’s rights as a patent holder be­ing re­stricted.

At the en­ter­prise level, the rec­ti­fi­ca­tion mea­sures that the NDRC has im­posed on Qual­comm are more im­por­tant than the fine for cre­at­ing fair mar­ket com­pe­ti­tion en­vi­ron­ment and pro­tect­ing con­sumers’ in­ter­ests. It shows the Chi­nese mar­ket will not put up with the mo­nop­oly ac­tiv­i­ties of en­ter­prises us­ing their tech­no­log­i­cal ad­van­tage to un­der­mine fair com­pe­ti­tion and con­sumers’ in­ter­ests. All en­ter­prises have to com­pete fairly, re­spect the mar­ket laws and en­sure that they do not tram­ple on con­sumers’ in­ter­ests in their quest to make prof­its, which is the in­ter­na­tional prac­tice.

The fine im­posed on Qual­comm also shows China is res­o­lute in its de­ci­sion to im­prove the rule of law in the mar­ket, even though the com­pany didn’t stop its public re­la­tions ac­tiv­i­ties dur­ing the en­tire pe­riod of anti-trust in­ves­ti­ga­tion. China Busi­ness­News re­ports show top Qual­comm lead­ers vis­ited NDRC seven times for ne­go­ti­a­tions since Oc­to­ber 2014. The anti-trust in­ves­ti­ga­tion against Qual­comm has be­come a ma­jorUS-China is­sue. Many seniorUS of­fi­cials and or­ga­ni­za­tions, in­clud­ing Pres­i­dent Barack Obama and the Amer­i­can Cham­ber of Com­merce in China, have com­mented on the case. But none could help Qual­comm es­cape the pun­ish­ment it de­served.

Ac­cord­ing to the 25thUS-China Joint Com­mis­sion on Com­merce and Trade talks in De­cem­ber 2014, the list of fruits showed China has been im­prov­ing the rule of law, mak­ing ef­forts to es­tab­lish a fair and trans­par­ent mar­ket en­vi­ron­ment, which en­able the mar­ket to play the de­ci­sive role in re­source dis­tri­bu­tion.

From this an­gle, the Qual­comm case also shows China’s de­ter­mi­na­tion to im­prove rule of law, and treat all com­pa­nies equally ac­cord­ing to law, which is the right di­rec­tion. The au­thor is a re­searcher on Amer­i­can stud­ies with the Chi­nese Academy of So­cial Sciences.

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