Telecom Vendors

Qualcomm says Trade Commission’s monopoly abuse lawsuit is “based on flawed legal theory”

Mobile phone chip manufacturer Qualcomm was hit with an antitrust lawsuit by the US Federal Trade Commission on January 17 alleging it abused its dominant position in the market for processors used in mobile phones and other devices. Qualcomm responded to the allegations saying the “complaint is based on a flawed legal theory, a lack of economic support and significant misconceptions about the mobile technology industry.”

The lawsuit against Qualcomm was filed in a federal court in California by the US Federal Trade Commission, claiming that the vendor’s business practices amount to “unlawful maintenance of a monopoly in baseband processors,” which describes the devices of Qualcomm manufacturers which enable cellular communications in mobile phones and other products.

In a statement, the Commission said Qualcomm used its position to impose “onerous and anticompetitive supply and licensing terms on cell phone manufacturers and to weaken competitors.”

The lawsuit details how, by threatening to disrupt other makers’ supply of baseband processors, Qualcomm obtained “elevated royalties and other license terms for its standard-essential patents that manufacturers would otherwise reject.”

The complaint further adds that Qualcomm “consistently refused to license those patents to competing suppliers of baseband processors,” despite its commitment to license standard-essential patents on fair, reasonable and non-discriminatory (FRAND) terms.

In addition, Qualcomm has been accused of extracting “exclusivity from Apple in exchange for reduced patent royalties”. The Commission alleges Qualcomm “recognized 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”. Simply put, this prevented Apple from getting processors from Qualcomm's competitors from 2011 to 2016.

Qualcomm, however, hasn’t taken the accusations lightly. In a statement the company said it “believes the complaint is based on a flawed legal theory, a lack of economic support and significant misconceptions about the mobile technology industry.”

"In our recent discussions with the FTC [Federal Trade Commission], it became apparent that it still lacked basic information about the industry and was instead relying on inaccurate information and presumptions," Qualcomm general counsel Don Rosenberg said in a released statement.

The company has faced similar antitrust investigations in the European Union and China, and last month was hit with a record fine of $850 million by South Korean enforcement regulators, AFP reported.

In 2015, California-based Qualcomm agreed to pay $975 million to settle antitrust charges in China. The company is currently challenging a EU competition inquiry which could result in a fine of up to 10 percent of its annual sales, which amounted to $26.5 billion for Qualcomm in 2015.

Taiwan-based Via Technologies, which was acquired by Intel in 2015, claims to have been affected by Qualcomm’s actions, as well as another Taiwan firm, MediaTek Inc.

In its defense, Qualcomm’s general counsel Rosenberg says the FTC deliberately sped up the investigation, filing the lawsuit just days before a change in the US presidential administration and with only three of five agency commissioners in place.

“This is an extremely disappointing decision to rush to file a complaint,” said Rosenberg. “It became apparent that the FTC was driving to file a complaint before the transition to the new administration.”

Rosenberg added: “We have grave concerns about the two Commissioners’ decision to bring this case despite a lack of evidence supporting the allegations and theories in the complaint. We look forward to defending our business in federal court, where we are confident we will prevail on the merits.”

The Commission’s ambition is to seek a court order to prevent Qualcomm’s alleged unfair methods of completion which it says violates the FTC Act. The FTC asked the court to order Qualcomm to cease its anticompetitive conduct and take actions to restore competitive conditions in the market.