S. Korea fines Qualcomm record $1.2b in antitrust case

Qualcomm has been fined for violating antitrust laws.
Qualcomm has been fined for violating antitrust laws.PHOTO: REUTERS

SEOUL • South Korea's antitrust regulator slapped a record 1.03 trillion won (S$1.24 billion) fine on Qualcomm for violating antitrust laws, the latest in a string of government actions that threaten the US chipmaker's most profitable business.

The South Korean Fair Trade Commission (KFTC) said yesterday that the company licensed its key patents to only mobile phone-makers and did not properly negotiate the terms of its licences. The agency also said Qualcomm coerced its customers into signing patent licence contracts when selling its chips in the country and did not fairly pay for the use of patents held by other phone-makers.

The decision from the home country of Samsung Electronics adds to investor concern that Qualcomm, which is also the subject of investigations in the United States and Europe, may struggle to defend its lucrative licensing business. Qualcomm gets the majority of profits - US$6.5 billion ($9.4 billion) in its most recent financial year - from selling the right to use technology fundamental to all modern phone systems.

Qualcomm, calling the decision "unprecedented and insupportable", said it will appeal the decision in Seoul's High Court.

"The KFTC ruling will not just benefit local handset-makers but other global chipset-makers too, so today's ruling from the commission seems a bit broader and stronger than that of the China's last year," said SU Intellectual Property patent lawyer Jung Dong Joon. "Qualcomm sales account for about 20 per cent in the Korean market and that's a significant market for Qualcomm."

For Samsung - the world's biggest phone-maker - and LG Electronics, the ruling opens up the possibility that they may be able to pay lower rates to Qualcomm. When Qualcomm settled an investigation by Chinese regulators last year, it accepted a lower rate charged on phones sold in that country. Samsung is Qualcomm's second-largest customer, accounting for about 11 per cent of its sales, according to Bloomberg's supply chain analysis.

KFTC also wants Qualcomm to let chipset-makers access its key patents, as well as to refrain from imposing unfair conditions on customers when signing contracts.

In 2009, the commission fined Qualcomm 260 billion won and ordered it to stop charging higher royalties to customers who buy chips from rivals. That case is under appeal.

Qualcomm was fined US$975 million last year by China, ending an inquiry that threatened its growth in the world's biggest mobile market.

The European Commission sent antitrust objections to Qualcomm last December, saying the chipmaker had paid "significant amounts" since 2011 to an unidentified major smartphone and tablet manufacturer in return for exclusive use of Qualcomm's chipsets. It may also have sold chipsets below cost from 2009 to 2011, to crush smaller competitor Icera.

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A version of this article appeared in the print edition of The Straits Times on December 29, 2016, with the headline 'S. Korea fines Qualcomm record $1.2b in antitrust case'. Print Edition | Subscribe