Wireless chipmaker giant Qualcomm is facing complaints by FTC (Federal Trade Commission of the U.S.) for wrong business practices.
Earlier, Qualcomm faced similar issues in China and Korea.
The South Korean Fair Trade Commission recently slapped a $850 million fine on Qualcomm for maintaining an “unfair business model” and creating a monopoly with its practices. The penalty in China was nearly $1 billion.
FTC, which has filed a complaint against Qualcomm in the U.S. District Court in the Northern District of California, alleges that certain Qualcomm’s business practices are in violation of U.S. competition law.
FTC on Wednesday accused Qualcomm of maintaining a monopoly over wireless chips for cellular phones through a “no license, no chips” policy under which it will supply its baseband processors only on the condition that cell phone manufacturers agree to Qualcomm’s preferred license terms.
That policy imposed “onerous” supply and patent-licensing terms to extract high royalties from cell phone makers and weaken competitors, the commission said.
Qualcomm recognised that any competitor that won Apple’s business would become stronger, and used exclusivity to prevent Apple from working with and improving the effectiveness of Qualcomm’s competitors.
Qualcomm said it believes the complaint is based on a flawed legal theory, lack of economic support and significant misconceptions about the mobile technology industry.
“The complaint seeks to advance the interests and bargaining power of companies that have generated billions in profit from sales of products made possible by the fundamental 3G and 4G cellular technology developed by innovators like Qualcomm,” said the chipmaker in a statement issued on Tuesday.
Qualcomm says it has never withheld or threatened to withhold chip supply to obtain agreement to unfair or unreasonable licensing terms. The FTC’s allegation to the contrary — the central thesis of the complaint — is wrong.
FTC Commissioner Maureen Ohlhausen voted against the filing the suit. FTC’s 3-member team, who was present, voted 2-1 favoring to sue Qualcomm. Qualcomm says the action is based on a flawed legal theory that lacks economic and evidentiary support will undermine U.S. intellectual property rights in Asia and worldwide. Only three of five FTC commissioners are in place.
Despite an appeal from members of Congress to refrain from litigation with untested legal theories that could damage competition in the U.S., FTC accelerated the investigation of Qualcomm and directed the filing of the complaint days before the change of the Administration.
“This is a disappointing decision to rush to file a complaint on the eve of Chairwoman Ramirez’s departure and the transition to a new Administration, which reflects a sharp break from FTC practice,” said Don Rosenberg, executive vice president and general counsel, Qualcomm.
Qualcomm’s investments and the work of its 30,000 employees have given consumers the ability to access the Internet and data instantaneously on mobile devices. The intellectual-property-rights policies of the cellular standards organizations do not require licensing at the component level.
Qualcomm says that the FTC does not have the authority to rewrite telecom industry policy.
