European Union’s antitrust regulators are set to investigate Qualcomm’s attempt to purchase NXP semiconductors. The deal is pretty huge and Qualcomm will be spending $38 Billion in the process. However, EU regulators are afraid that if the deal is allowed to go through, it may result in serious trouble for competitors and rivals.
So here is the deal: Mergers and acquisitions that very large in magnitude need to be confirmed by regulators before they are allowed to go through. Why? Well, a company occupies a large percentage of the market and owns a lot of intellectual property has the potential to put pressure on other companies operating in the sector.
In Qualcomm and NXP’s example for instance, the combined entity would have the leverage to increase prices in the market. Also, considering that the former could well bundle NXP’s intellectual property with its own, this could have an effect on important technologies like NFC.
The EU decided to investigate the matter once Qualcomm said that was not willing to offer any concessions to the European Union regarding the latter’s concerns with regards to the effect the deal would have on the market.
The electronics market is on the rise. With new technologies and avenues of growth like self-driving cars and so on, there are plenty of opportunities in the industry. However, considering that both Qualcomm and NXP are giants in their own right, they do have the potential to stifle competition if they set their mind to it. And Qualcomm is already in plenty of trouble, with plenty of impending lawsuits related to its patents.
And that is definitely something the EU would be keen to prevent. Meanwhile, Qualcomm and NXP will now have to convince regulators that the deal would not affect the market adversely, if they want it to go through.
