European Union Commissioner for Trade Karel De Gucht has accused both Huawei and ZTE for violating anti-subsidy and anti-dumping guidelines.  Both of the telecommunications companies were threatened with a formal investigation to see just how far the Chinese-based companies may have gone in regards to unfair trade practices in the region.

The Reuters news agency is reporting that the European Union’s head trade official just announced that two of the top Chinese telecommunication companies have violated trade laws.  E.U. Trade Commissioner Karel De Gucht said his agency would soon be launching a formal investigation into both Huawei and ZTE, which are suspected of conducting anti-competitive acts in Europe in order to keep their sales on top.

In an interview with Reuters Du Gucht accused ZTE and Huawei of “dumping their products” on the European market.  He stated that the goal was to reach the U.S. market when the free trade agreements talks that will begin in July of this year. When asked what type of actions would be taken on the companies Du Gucht said he did not want to elaborate on what the sanctions would be but did say that both companies know exactly what could happen. “The Chinese know our procedures as well as we do,” Du Gucht said. “They are very well aware of what is in our toolbox,"

Chinese trade officials responded to the sanction threat with retaliation, but did not elaborate on what that might be. Furthermore, ZTE and Huawei both have denied any wrongdoing by benefiting from any sort of unfair trade practices in the E.U. or elsewhere. 

Chinese exports are an important part of Europe’s networking equipment with all manner of products being used by telecommunications providers for their voice and data transmission.  Europe is also a very important trading partner with China’s telecom industry and just second to the U.S. in regards to sales. 

In 2012 China made over $372 billion (U.S.) in sales to the E.U.  Last year Huawei overtook the European-based Ericsson as the world’s largest telecom equipment maker, with ZTE coming in at number five.