IN BRIEF: A South Korean regulator has fined Qualcomm 1.03 trillion won ($865 million) for alleged antitrust violation, a decision the San Diego-based company will contest in court. The penalty is the largest ever levied to an individual company in South Korea.
The Korea Fair Trade Commission (KFTC) said on Wednesday, Qualcomm licensed its key patents only to key handset makers and didn’t properly negotiate the terms of its licenses. It also forced them to cough up royalties for an unnecessarily broad set of patents as part of sales of its modem chips.
Qualcomm Fined $865 for Abusing ‘Market Position’
Qualcomm abused its market position to restrict competition by refusing or limiting licensing of its standard essential patents related to modem chips to rival chipmakers such as Samsung Electronics Co., MediaTekInc. and Intel Corp.; impeding their sales and leaving their products unguarded to lawsuits.
The regulator ordered Qualcomm to negotiate with rival chipmakers on patent licensing and renegotiate chip supply agreements with handset makers. This would affect the U.S.-based firm’s dealings with Apple Inc., Intel, Samsung, Huawei Technologies Co. Ltd. if upheld.
Qualcomm is calling the decision ‘unprecedented and insupportable,’ and said it will appeal the decision in Seoul’s high court. According to the company’s general counsel, Don Rosenberg, the ruling doesn’t go into effect immediately and Qualcomm will seek a stay from the courts while it appeals.
Qualcomm Becomes Most Fined Company
The KFTC began its investigations into Qualcomm’s practices in 2014 following complaints from unnamed companies. Companies including Intel, Apple, Huawei, and MediaTek have expressed their views during the regulator’s deliberation process.
KFTC Secretary General Shin Young-son told a media briefing in Seoul that the ruling was not about protecting domestics companies such as LG Electronics Co. and Samsung but about improving market competition for all players.
Scathing History of Regulatory Challenges
The San Diego-based chip maker faces global scrutiny over its patent-licensing business. In 2009, Qualcomm was fined 273 billion won by the KFTC for abusing its market power in CDMA modem chips, which were then used in handsets made by LG and Samsung.
- Qualcomm may have sold chipsets below cost from 2009 to 2011 to thwart rival Icera (now owned by Nvidia Corp.).
- In 2011, the European Commission raised objections saying Qualcomm had paid ‘significant amounts’ to a major smartphone and tablet manufacturer in return for using its chipsets exclusively in its products.
- It paid a $975 million fine following a 14-month probe in February 2015.
- In December 2015, the European Union accused it of abusing its dominant position in the market to impede rivals.
Regulators in the United States and Taiwan are also investigating Qualcomm.