After the European Union opened a competition investigation into Corning earlier this month, citing concerns over alleged exclusive dealing, the Gorilla Glass maker has offered a raft of changes to its contract clauses aimed at settling the probe.
The U.S. company is a supplier to major electronics brands, including Apple’s iPhone, and the changes could also be meant to prevent the investigation from ramping up further. Confirmed breaches of competition rules can result in penalties of up to 10% of global annual turnover.
The European Commission is now soliciting industry feedback on Corning’s offer. Comments can be submitted for around six weeks.
If the EU accepts Corning’s proposals after this market test, the bundle of commitments would be made legally binding on the company. They would also be applicable worldwide and remain in force for a period of nine years, and implementation would be monitored by a trustee that would report to the Commission. Any breaches of the commitments would risk major fines.
Exclusivity dealing, purchase quotas, and patent enforcement in the frame
Corning has proposed to waive all exclusivity clauses in all of its current agreements with device makers (original equipment manufacturers, or OEMs) and finishers for the supply of alkali-aluminosilicate glass (alkali-AS glass), which is mainly used for displays in mobile devices. There’s also an agreement not to use such clauses (or others with similar effects) in future agreements worldwide.
For devices intended to be sold in the European Economic Area (EEA), Corning is also proposing not to require OEMs to purchase or otherwise source any quantity of alkali-AS glass from its own business. It is also promising that it would not offer device makers any price advantages conditional on such requirements.
For both OEMs’ non-EEA combined demand for alkali-AS glass and transparent glass ceramics (i.e., clear glass ceramics), and their total demand for either lithium aluminosilicate glass (LAS glass) or clear glass ceramics, it is proposing not to require device makers to buy or cause their supply chain to buy more than 50% of their respective demand from Corning. In addition, Corning will not offer OEMs any price advantages conditional on such requirements, per the proposal.
Another proposal focuses on third-party companies that process raw glass (i.e., finishers). Corning is offering not to require that finishers buy more than half their combined demand for sodium aluminosilicate glass (NAS glass), LAS glass, and clear glass ceramics from Corning, nor to condition price advantages on such purchasing requirements.
In addition, it is offering not to require — in any other way — that finishers concentrate more than 50% of this combined demand with Corning.
“This means that finishers are free to decide the quantity of the different cover materials (NAS Glass, LAS Glass or clear glass ceramics) that they want to purchase from Corning to comply with this overall cap,” runs the European Commission’s press release summarizing Corning’s offer.
Further commitments relate to the enforcement of patents Corning holds for break-resistant cover glass. Here it has offered to base any claim only on patent infringement and not on breach of contract. Nor will it use any contractual mechanisms (such as penalties) to reinforce patent claims, per the proposal.
As part of the proposal, Corning is also committing to communicating with device makers and finishers to explain the changes to its business terms, including in English and Chinese Mandarin.