China's anti-monopoly regulator on Wednesday said Qualcomm Inc. was suspected of overcharging and abusing its market position, allegations which could see the U.S. chip giant hit with record fines of more than $1 billion.
The National Development and Reform Commission (NDRC) also said it was in talks with another U.S. technology firm, InterDigital Inc , about a possible settlement to a separate anti-monopoly probe as the regulator focuses on the rapidly evolving information technology market.
Foreign firms from drugmaker GlaxoSmithKline to Apple Inc are facing tougher scrutiny in the world's second-biggest economy as China targets key industries to protect consumers from bloated prices and second-rate products.
In its first public statements about the Qualcomm investigation, the watchdog said it began making enquiries after receiving complaints that the San Diego-based company was charging higher prices in China than it does in other countries.
"We received reports from relevant associations and companies that Qualcomm abuses its dominant position in the market and charges discriminatory fees," Xu Kunlin, who heads the NDRC's anti-monopoly and price supervision bureau, told a press conference in Beijing.
The NDRC dual investigations are part of a focus on information technology providers, especially companies that license patent technology for mobile devices and networks.
Industry experts say the NDRC, which is also the government's main economic planning body, is trying to lower domestic costs as China rolls out its faster 4G mobile networks this year.
Earlier this month, the China Mobile Communications Industry Association said it had filed a complaint against Qualcomm for overcharging for use of its patents.
Under the anti-monopoly law, the NDRC can impose fines of between 1 and 10 percent of a company's revenues for the previous year. Qualcomm earned $12.3 billion in China for its fiscal year ended September 29, or nearly half of its global sales.
The NDRC said it conducted raids at Qualcomm's Beijing headquarters and at its Shanghai offices in November.
Officials subsequently met William Bold, Qualcomm's senior vice president for government affairs, and Fabian Gonell, vice president and counsel for Qualcomm's technology licensing, in December, the official Xinhua news agency reported.
Qualcomm spokeswoman Christine Trimble said the company was cooperating with the investigation.
"We haven't seen the transcript of today's press conference but we intend to continue cooperating fully with the NDRC," she said. "The NDRC has advised us the investigation is confidential."
Any settlement with InterDigital or Qualcomm is likely to include commitments to lower patent licensing fees for Chinese customers, analysts say, along with a fine.
On InterDigital, senior NDRC official Lu Yanchun said the company had to "make promises on what steps it will take in light of problems we've raised" about its licensing content.
InterDigital, which develops patent technologies for wireless devices and networks, had been "very cooperative" and had "taken some positive steps," Lu said.
Executives from the Delaware-based company met with NDRC officials on January 3 to discuss ways to resolve the investigation, according to a stock exchange filing.
InterDigital also apologised for "misunderstanding Chinese laws" in a December statement, in which the company said its executives feared arrest if they were to travel to Beijing.
The NDRC, which is ramping its use of price-gouging and anti-monopoly oversight, has launched a number of investigations into Chinese and foreign companies over the past year.
In August, the regulator fined six infant formula manufacturers, including Mead Johnson Nutrition Co , Danone and Fonterra , a record $110 million after a probe into price fixing and anti-competitive practices.
© Thomson Reuters 2014