EU document faults Huawei, ZTE for unfair pricing

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A European Commission analysis ascertained that China-based Huawei and ZTE are guilty of dumping wireless network infrastructure at below fair-market prices in Europe, negatively impacting European competitors and putting pressure on European officials to decide what to do next, according to the Wall Street Journal.

The information is included in an internal document, the existence of which the Wall Street Journal said has not been previously reported.

The European Commission, the European Union's executive arm, found that Huawei and ZTE sell network gear for 35 percent below what it calls fair market prices, a practice enabled by extensive support from the Chinese government, including preferential financing for customers of the two companies. The market share of Chinese firms in Europe is 10 times what it was five years ago, while European vendors' market share has slid by 15 percent as of last year, according to the analysis.

European governments were given the analysis earlier this year. The report indicates a need for EU intervention to prevent European companies from being driven out of business. "These unfair practices call for an action, as, in this innovation-driven industry, companies may exit the market very abruptly," said the analysis.

European officials are in a quandary, however, as acting on the report would likely spark a nasty trade war with China's government, which could retaliate with tariffs on European goods. Therefore, the commission is now reportedly awaiting submission of a promised proposal from Chinese authorities to address Europe's concerns about government support being given to Huawei and ZTE.

The Wall Street Journal said ZTE did not respond to a request for comment, while Huawei issued a statement saying its success is due to enabling customers to reduce "overall operating costs through smart, technological innovation, not by pricing."

In October, the U.S. House Intelligence Committee warned telecommunications operators that Huawei and ZTE pose security risks to U.S. interests and encouraged U.S. network providers and systems developers "to seek other vendors for their projects."

China has harshly criticized the report, which also called on the U.S. government to investigate China's continued financial support of the two companies.

For more:
- see this Wall Street Journal article (sub. req.)

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