Antitrust Law Daily Wrap Up, ACQUISITIONS & MERGERS NEWS: Qualcomm receives EU, KFTC approval for purchase of NXP Semiconductors, (Jan 18, 2018)

By Robert B. Barnett Jr., J.D.

U.S. smartphone chipmaker Qualcomm has received permission from both the European Commission (EC) and from the Korea Fair Trade Commission to purchase Netherlands-based NXP Semiconductors N.V. With these two latest permissions, Qualcomm has now received eight of the nine world-wide approvals it needs, with only China remaining.

Following the approvals, Qualcomm CEO Steve Mollenkopf issued the following statement: "We are pleased that both the European Commission and the Korean Fair Trade Commission have granted authorization of the NXP acquisition, and we are optimistic that China will expeditiously grant its clearance. Acquiring NXP is complementary to Qualcomm’s global portfolio, providing tremendous scale in automotive, IoT, security and networking, and will greatly accelerate our ability to execute and create value in new and adjacent opportunities"

The EC had initially expressed concerns that the takeover might be anticompetitive, in light of the fact that Qualcomm and NXP have dominant or strong market positions with "highly complementary products," and that they own a significant amount of intellectual property related to smartphone manufacturers. Qualcomm mainly develops baseband chipsets for smartphones to allow them to connect to cellular networks. NXP supplies several types of semiconductors, including near-field communication (NFC) and secure element (SE) chips for smartphones, which enable short-range connectivity, particularly for secure payment transactions. NXP also owns MIFARE, a leading technology used by European transport authorities to collect ticket fares.

To address the EC’s anticompetitive concerns, Qualcomm has agreed to the following conditions: (1) it will offer licenses to NXP’s MIFARE technology and trademarks for eight years on terms at least as advantageous as those currently existing, (2) it will for eight years provide the same level of interoperability between its own baseband chipset and the NFC and SE products it acquires from NXP with the corresponding products of other companies, (3) it will not acquire NXP’s standard essential NFC patents and certain non-standard essential NFC patents, but instead will transfer these patents to a third party, which will grant worldwide royalty-free licenses to the patents for three years, and (4) it will acquire NXP’s remaining non-standard essential NFC patents, but it will agree to (a) not enforce its rights against other companies and (b) grant worldwide royalty-free licenses to the patents.

EC Competition Commissioner Margrethe Vestager issued the following statement upon the EC’s decision to approve the takeover: "We use our smartphones for different things and now also more and more as mobile wallets, to pay for public transport or make other secure payments. With this decision, we ensure that Qualcomm’s takeover of NXP will not prevent consumers from continuing to enjoy the benefits of these new innovative technologies at competitive prices."

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