Huawei & ZTE Under Scrutiny Again, This Time By The European Commission For Unfair Competition

Another round of headaches for Chinese telecom equipment makers Huawei and ZTE–after previously facing scrutiny over security concerns in the U.S., the two companies are now being targeted by the European Commission. The European Union’s executive body is seeking to investigate Huawei and ZTE for undercutting European firms by receiving state subsidies, and wants the backing of EU states to move ahead even without a complaint from domestic manufacturers, according to sources cited in a Reuters report.

Reuters reports that European manufacturers Ericsson, Alcatel-Lucent, and Nokia Siemens Networks have refused to cooperate with the Commission or file a complaint because they fear being shut out of the lucrative Chinese telecoms market. In turn, Huawei has denied receiving unfair subsidies and says it complies with international laws and does not engage in espionage. Huawei is the world’s second largest telecom gear maker after Ericsson.

According to the report, EU Trade Commissioner Karel De Gucht intends to move ahead and bring up the issue with EU trade ministers at a meeting in Dublin this week. An internal EU report last year recommended that EU take steps to limit the growth of Chinese telecoms equipment maker, citing competition against domestic companies as well as threats to security.

The Commission’s complaints are similar U.S. concerns about the Chinese companies. Last month, Sprint Nextel and SoftBank pledged not to use gear from Huawei if they merged, though that tie-up is now uncertain after Dish Network launched a $25.5 billion bid to compete with SoftBank’s previous offer of $20.5 billion. Huawei recently said that its U.S. growth prospects will be hindered this year by U.S. security concerns after a U.S. congressional report last October found that U.S. national security interests could be undermined if Huawei and ZTE provide gear for critical infrastructure.

But EU companies have not taken a unilateral stance. In Britain, Huawei has been subject to scrutiny by the government over security concerns, though the company is also seen as a major job provider both there in the Netherlands. Germany, however, stopped Huawei last year from providing infrastructure for a national academic research network.