Qualcomm has faced legal hurdles in recent years for its licensing practices in both Europe and in Asia. Now, the company is coming under fire right here in the United States, and the Federal Trade Commission ( FTC ) is leading the charge.
The FTC alleges that Qualcomm used its dominant position as the world\u2019s premier supplier of mobile baseband chips to force \u201conerous and anticompetitive supply and licensing terms\u201d upon smartphone manufacturers. These actions were also reportedly meant to stifle Qualcomm\u2019s competitors in the baseband field in order to maintain its position as the top supplier.
Qualcomm is accused of running afoul of fair, reasonable, and non-discriminatory ( FRAND ) patents, which have been deemed essential industry standards necessary for the proper function of hardware with cellular networks. Qualcomm allegedly threatened the supply of baseband chip for smartphone manufacturers that didn’t pay increased royalties fees for these FRAND patents.
\u201cThese royalties amount to a tax on the manufacturers\u2019 use of baseband processors manufactured by Qualcomm\u2019s competitors, a tax that excludes these competitors and harms competition,\u201d cites the FTC. \u201cIncreased costs imposed by this tax are passed on to consumers, the complaint alleges.\u201d
The FTC is accusing Qualcomm of three primary offenses:
The third relates specifically to its arrangement with Apple. The lawsuit alleges that Qualcomm cornered Apple into remaining its sole supplier for baseband chips from 2011 through 2016 (Intel finally broke through the wall by providing GSM chips for the iPhone 7 in 2016 ). \u201cQualcomm recognized that any competitor that won Apple\u2019s business would become stronger, and used exclusivity to prevent Apple from working with and improving the effectiveness of Qualcomm\u2019s competitors.\u201d
Qualcomm reached an agreement with Apple that precluded it from using competing technology like WiMax (which a few years ago was vying against LTE to become the dominant 4G wireless standard). For its part, Apple received rebates for the royalty payments made to Qualcomm \u201cin excess of a specified per-handset cap\u201d according to the court filing.
Qualcomm of course denies any wrongdoing, and was quick to fire back at the FTC allegations:
Qualcomm also alleges that this lawsuit was fast-tracked before all evidence was presented in what it believes was a result of potentially partisan tomfoolery:
For those keeping score, Qualcomm was fined $975 million by Chinese regulators in 2015 and was hit with another $853 million fine in South Korea for similar licensing practices in 2016. So perhaps Qualcomm shouldn\u2019t be too surprised that the U. S. would also get in on the act.<\/p>\n