The European Trade Commission is all set to launch a massive case against Chinese firms Huawei and ZTE for allegedly dumping products on the EU market after allegedly benefiting from illegal state subsidies.
The commission has told EU member states that it has hard evidence against the two telcos after working on the case for months, sources told The Financial Times.
Officials also believe that the network equipment firms have been selling their gear in the EU below cost, a process known as "dumping".
The case could become official as soon as next month, the sources said.
A spokesperson for trade commissioner Karel De Gucht declined to comment on the report.
But De Gucht did speak out about EU-China relations last week. He told the European Parliament that he agreed with many of the findings in a report entitled "China: Unbalanced Trade?".
"As the report rightly notes, it is crucial for European business that we vigilantly defend our interests whenever trade rules are not respected," he said. "We are doing that with anti-dumping and anti-subsidy instruments.
"And we have resorted to WTO when that was necessary; for example to address restrictions on access to raw materials and rare earths. On the question whether China can obtain Market Economy Status, I can only insist that this depends mainly on China itself, as it has to meet a number of objective criteria."
If the case does go ahead, it would be the first time that the commission has launched an investigation off its own back, instead of as a result of a formal complaint from a company.
De Gucht said earlier this month that it was often tough for firms to complain about others in their industry when they were all investing with each other, in each other or in each other's countries.
"It is undeniable that many European companies are unwilling to come forward and make justified trade defence complaints due to fear of consequences for their business," De Gucht told a trade conference.
"The consequences can be serious for companies that export to or invest in the country in question."
Neither Huawei nor ZTE had responded to a request for comment at the time of publication. ®