Probes 'not targeting' foreign firms: official

An official of China's antitrust regulator on Wednesday denied there is any implicit agenda behind its investigations of foreign companies, while confirming that two foreign telecommunications companies are being probed.

The comment was made in response to claims the agency's scrutiny of IT providers stems from its desire to lower domestic costs as China rolls out its fourth-generation mobile networks.

"People like to speculate about whether there is any 'background' to the probe. In fact, there is no 'background' behind any of the cases we have investigated," Xu Kunlin, director of the bureau of price supervision and antimonopoly, told a news conference in Beijing.

The bureau is a division of the National Development and Reform Commission, the top economic planner.

Xu confirmed the bureau is conducting an investigation into Qualcomm Inc and InterDigital Inc, both from the United States.

"The two cases stemmed from complaints and have nothing to do with 3G or 4G standards," he said.

Qualcomm, based in California, and InterDigital, in Delaware, have previously disclosed they were under investigation, but Xu's comments were the first by the Chinese government.

The NDRC started an inquiry against Qualcomm last November, saying the company had violated China's antimonopoly law.

Xu said Qualcomm is suspected of abusing its intellectual property rights and charging discriminatory patent licensing fees to Chinese mobile device manufacturers and network operators.

"In terms of abusing intellectual property rights, we have exchanged views with many law enforcement agencies in foreign countries and received great inspiration. They call this kind of firm 'patent rogue companies'," Xu said.

Qualcomm's business in China falls into two parts — mobile phone chipset production and patent licensing. Most mobile phone companies such as Lenovo Group Co Ltd, as well as manufacturers Huawei Technologies Co Ltd and ZTE Corp, are Qualcomm's major clients.

Qualcomm reported $12.3 billion in revenue from China in the 12 months that ended on Sept 30 — 49 percent of its total revenue.

"Thanks to its strong technology advantages and patent pool, Qualcomm has a dominant and incomparable position in the Chinese telecom and mobile phone industries," said Xiang Ligang, a Beijing-based telecom expert.

Founded in 1985, Qualcomm is known for inventing a digital wireless technology called Code Division Multiple Access.

CDMA eventually became the core of some mainstream 3G telecom standards such as Wideband Code Division Multiple Access.

Its competitiveness has extended to the 4G stage, because, in the short term, Qualcomm has no rivals in Long-Term Evolution 4G chipsets.

Under China's Antimonopoly Law, the NDRC can impose fines of 1 to 10 percent of a company's revenue from the previous year.

That means Qualcomm could face up to $1.23 billion in fines if it's found to have broken the law. Even at the lowest rate, it would be $123 million.

The highest fine imposed by the NDRC so far was in August last year, when the regulator fined six infant formula manufacturers — including Mead Johnson Nutrition Co, Groupe Danone and Fonterra Co-operative Group Ltd — a total of $110 million after a probe into price-fixing and anti-competitive practices.

Experts said the exact amount of fines still hinges on how negotiations proceed. Qualcomm might have to make concessions on its royalties if it wants to achieve a low fine.

The NDRC also confirmed it started an investigation of InterDigital last May. It said the company had applied to halt the probe after months of active cooperation.

Xu said the bureau is considering InterDigital's request and stressed a condition of doing so is that the company promises to address the issues.

The wireless research and development company issued a statement on Friday, saying InterDigital executives had "indicated to the NDRC their apologies that the company had misunderstood Chinese law and the NDRC's rules and procedures in that regard".

InterDigital reaps a majority of its revenue from patent licensing. It has ongoing legal proceedings with Huawei in the US, Europe and China.

The NDRC has ramped up its antitrust efforts and put many companies on its scrutiny list. It has probed charges and price manipulation in a number of industries, including banks, milk formula and telecommunications.