Chinese telecommunications giants ZTE and Huawei are set to face an EU investigation for anti-competitive behavior. Although the pair have both seen moderate success marketing their consumer devices in the region, the investigation is regarding the companies' infrastructure equipment, which provides the backbone for the industry. In recent years Chinese companies have taken around a quarter of of the EU market, with sales of around €1 billion (roughly $1.3 billion). But according to European Union Trade Commissioner Karel De Gucht, the success has been due to anti-competitive predatory pricing.
Alleged state support leads to an unfair playing field
De Gucht isn't launching a formal investigation just yet, but says he's willing to in order to protect what is a "strategic" sector for Europe's economy. "Huawei and ZTE are dumping their products on the European market," De Gucht tells Reuters. Cheap capital (allegedly through state support) for Chinese companies "creates a distorted playing field and that is what this is about," De Gucht continued. Dumping refers to flooding a foreign market with products at a cheaper rate than domestic companies, and is often categorized as anti-competitive behavior. Europe is a major market for China — exports totalled €290 billion ($376 billion) in 2012, more than double the total figure of Europe-to-China exports.
Huawei denies allegations, says European companies' woes can be put down to laziness
Any investigation could have a negative impact on Euro-China relations. Both ZTE and Huawei have faced intense scrutiny in the US over security concerns. The US investigations, which despite their focus on security also doubled as a move to protect US companies' interests, led Huawei to give up on the US network equipment market entirely. The fact that the EU is also planning to resist the influx of Chinese imports isn't great news for either company.
In an emailed statement, Huawei told Reuters it "always plays fair and we win business and trust from our customers through our innovative technology and quality service, rather than via pricing or subsidies." Separately, Huawei's Western Europe president Tao Jingwen told China Daily that "some European companies have blamed Chinese companies for their losses, but sometimes they were caused by their own laziness." ZTE has declined to comment thus far, but has in the past denied allegations that it is subsidized by the Chinese administration.