Alleging Qualcomm of unfair business practices and antitrust violations, South Korean regulators have levied a monstrous 1.03 trillion won ($854 million) fine on the American chipmaker. This is the largest fine that has even been slapped on an individual tech company, especially bad for Qualcomm who is said to in violation of competition law, reports Reuters.
These antitrust allegations against the chipmaker have come to light when it is also facing a cooldown due to the flailing smartphone market and facing scrutiny over patent licensing issues across the globe. The Korea Fair Trade Commission (KFTC) on Wednesday mentioned that Qualcomm has abused its dominant position in the market and forced its business practices down the phone makers’ throats.
The chipmaker is said to be involved in unfair license agreements with regard to its wireless patents to the mobile industry. The company’s been recognized of denying supply of critical smartphone chips to manufacturers who’ve disagreed with its terms, said the regulator. It even collects royalty payments from its clients using a method which they’ve defined themselves. Instead of calculating the royalties based on the price of the chip and the patents, it is determined using the price of the handset.
This is said to hamper the chip business of its competitors, Intel Corp, Samsung Electronics Co Ltd and MediaTek Inc, who’ve been refused essential licenses related to wireless modem chips. The KTFC has taken the said move to protect its homegrown companies, such as LG and Samsung as well as push for a healthy competition in the electronics market. The KTFC began investigating the chipmaker’s practices back in 2014, following complaints from industry participants. Talking about the same, KFTC Secretary General Shin Young-son, said,
We investigated and decided on these actions because Qualcomm’s actions limit overall competition.
Following the investigation, the Korean regulator has ordered the chipmaker to negotiate with competitors over patent licensing issues and chip supply agreements. Until a final decision isn’t reached, one cannot comment on Qualcomm’s relation with handset manufacturers but it might affect their dealing with major tech companies (currently its partners) namely Apple, Intel, Samsung, and Huawei Technologies.
Qualcomm, on the other hand, has decided to challenge the charges levied on the chipmaker in Seoul High Court saying that it’s inconsistent with the facts and the law as well. The company added that it will file for an immediate stay of the order and appeal against the fine (which it needs to pay in 60 days) in court. Defending the company’s practices, Don Rosenberg, executive VP and general counsel for Qualcomm, says,
Qualcomm strongly believes that the KFTC findings are inconsistent with the facts, disregard the economic realities of the marketplace, and misapply fundamental tenets of competition law.
Importantly, this decision does not take issue with the value of Qualcomm’s patent portfolio. Qualcomm’s enormous R&D investments in fundamental mobile technologies and its broad-based licensing of those technologies to mobile phone suppliers and others have facilitated the explosive growth of the mobile communications industry in Korea and worldwide, brought immense benefits to consumers, and fostered competition at all levels of the mobile ecosystem.
He further added that the KTC has repeatedly denied Qualcomm access to case files and the right to cross-interview the witnesses that have alleged the company of malpractice to phase out competition. It is now relying on the High Court to accept its appeal and uphold antitrust laws that really are applicable to them.