REUTERS - South Korea's antitrust regulator fined Qualcomm Inc (QCOM.O)
1.03 trillion won ($854 million) for what it called unfair business practices
in patent
licensing and modem chip sales, a decision the U.S. chipmaker said it
will challenge in court.
The fine, the largest ever levied in South Korea, marks the latest
antitrust setback for Qualcomm's most profitable business of licensing wireless
patents to the mobile industry, at a time when the business is facing headwinds
from a cooling smartphone market.
The Korea Fair Trade Commission (KFTC) ruled on Wednesday Qualcomm abused
its dominant market position and forced handset makers to pay royalties for an
unnecessarily broad set of patents as part of sales of its modem chips.
Qualcomm also restricted competition by refusing or limiting licensing of
its standard essential patents related to modem chips to rival chipmakers such
as Intel Corp (INTC.O),
Samsung Electronics Co Ltd (005930.KS)
and MediaTek Inc (2454.TW),
the regulator said, hindering their sales and leaving their products vulnerable
to lawsuits.
The regulator ordered Qualcomm to negotiate in good faith with rival
chipmakers on patent licensing and renegotiate chip supply agreements with
handset makers if requested - measures that would affect the U.S. firm's
dealings with major tech companies including Apple Inc (AAPL.O),
Intel, Samsung and Huawei Technologies Co Ltd [HWT.UL] if upheld.
The KFTC said it began its investigations into Qualcomm's practices in
2014 following complaints from industry participants, but did not name specific
companies.
Foreign companies including Apple, Intel, MediaTek and Huawei expressed
their views during the regulator's deliberation process, KFTC Secretary General
Shin Young-son told a media briefing in the country's administrative capital.
"We investigated and decided on these actions because Qualcomm's
actions limit overall competition," Shin said, adding that the ruling was
not about protecting domestic companies such as Samsung and LG Electronics Inc
(066570.KS)
but about improving market competition for all players.
Qualcomm said it will file for an immediate stay of the corrective order
and appeal the decision to the Seoul High Court. The firm will also appeal the
amount of the fine and the method used to calculate it.
"Qualcomm strongly disagrees with the KFTC’s announced
decision," it said in a statement.
IN REGULATORY CROSSHAIRS
The fine is the latest in a series of antitrust rulings and
investigations faced by Qualcomm from regulators across the globe. In February
2015, Qualcomm paid a $975 million fine in China following a 14-month probe,
while the European Union in December 2015 accused it of abusing its market
power to thwart rivals.
Stacy Rasgon, an analyst with AB Bernstein, said the fine itself was
large but also said the KFTC's orders for Qualcomm to alter its business
practices have bigger future implications for the chipmaker.
A major challenge for Qualcomm, he said, would emerge if the ruling
forces the company to license patents for some of its chips to rivals such as
Intel, which has been competing hard to land its modem chips in mobile phones.
"How can they force you to license to a competitor? That's what I
never understood. I guarantee Qualcomm won’t want to do that," he said,
adding that the dispute could take years to play out in South Korean courts.
The KFTC fined Qualcomm 273 billion won in 2009 for abusing its dominant
position in CDMA modem chips, which were then used in handsets made by Samsung
and LG.
Regulators in other jurisdictions, including the United States and
Taiwan, are also investigating Qualcomm.
REUTERS
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