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EC sends antitrust complaint to smart chip cartel suspects

Fireside chat fails to satisfy

Internet Security Threat Report 2014

With settlement talks stalled, the European Commission has launched a formal investigation into whether suppliers of cryptographic chips conspired to fix prices across Europe. The commission announced today that it had sent out a warning to several smart card chip suppliers that it was investigating allegations that they had participated in a cartel.

It did not name the suppliers who had received statements of objections. Cartel activity is a breach of EU antitrust rules.

The original investigation started back in 2009, with raids on various smart card and SIM providers accused of operating an illegal cartel. Since then, the parties involved have tried to resolve things with "settlement talks", but those are stalled, so the EC has kicked off a proper investigation.

"The essence of settlement is to benefit from a quicker, more efficient procedure, and to reach a common understanding on the existence and characteristics of a cartel," says the explanatory note from the European Commission. "If that is not possible, the Commission will not hesitate to revert to the normal procedure and to pursue the suspected infringement", which is what it will now do.

Secure elements are used in SIM chips as well as credit cards and anywhere else an authenticated ID is needed, but the nature of the product dictates that suppliers be trusted by customers so resolves down to a small number of large-volume players, further reduced by consolidation.

The barriers to entry are extremely high - a new supplier will have to engender trust as well as having the necessary technical know-how, so a handful of well-known suppliers dominate the market.

But the EC will want to establish if those suppliers colluded to fix prices across Europe, and had hoped to clear that up with a friendly chat.

Such chats are well defined, and offer companies found to be operating a cartel a 10 per cent discount on the resulting fine, but with a formal investigation underway, anyone found guilty will be fined in full. ®

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