The European Union is considering whether to start an official investigation into ZTE and Huawei over trade practices, according to EU trade commissioner Karel De Gucht.
As reported by The Wall Street Journal, the EU trade commissioner said that a decision will be made on whether to investigate the two Chinese telecom firms based on the allegation that they may have broken international laws. The European Commission is currently in the process of collecting information on both ZTE and Huawei, and Chinese authorities are involved in the matter.
"We are very closely following this and continuing our investigation. We will have to see in the coming weeks, if not months, what finally should be the decisive step we take," Mr. De Gucht told the publication. "We have already had discussions about the issue with the Chinese authorities, not directly about the companies themselves, but about the financial constructs that make us have doubts about the level playing field in this sector."
An analysis written up by the European Commission and seen by the WSJ says that the two firms are "clearly dumping" their products onto the European market at prices which are considered low enough to be unfair to international competitors, using aid such as subsidies and cheap financing from the Chinese government and state-owned Asian banks to achieve this, and are breaking international trade law in the process.
According to the report, three main European rivals in the business -- Ericsson, Alcatel-Lucent and Nokia -- have all suffered losses due to stiff Chinese competition, and are having to lay off workers while Chinese companies continue to knock down their prices for tech products. De Gucht told the publication that due to the precarious financial position of these firms, innovation would potentially suffer, and eventually the European companies would be forced out of the industry after falling too far behind.
The investigation, if it goes ahead, could lead to harsh tariffs imposed on the two wireless-network equipment firms in order to level the playing field.
Huawei says that the company hasn't secured an advantage through these alleged practices, and it has not affected its global marketshare as a result. In addition, the Chinese government has rejected all of the European Commission's claims.
The possibility of investigating ZTE and Huawei has been raised before in Europe, but as there were no formal complaints submitted by European companies -- which is usually necessary -- the matter was left. However, if the EU decides to press ahead, this will be the first investigation into unfair trading practices launched without this requirement -- and would add another problem for the firms, already having dealt with claims of national security risk, to face.