South Korea Hits Apple Modem Supplier Qualcomm With $854M Fine
Mobile chipmaker Qualcomm Inc. (QCOM) was slapped with an $854 million fine by South Korea’s antitrust regulator, which ruled that Qualcomm engaged in unfair business practices regarding the licensing of its patents.
The fine, which is the biggest ever lodged against a company in South Korea, is facing a challenge by Qualcomm, which said in a statement the ruling “is an unprecedented and insupportable decision relating to licensing practices that have been in existence in Korea and worldwide for decades and that the KFTC (Korean Fair Trade Commission) reviewed but did not question in a previous investigation of Qualcomm.”
Qualcomm said it will file an immediate stay of the corrective order and will appeal the KFTC’s decision and the amount of the fine to the Seoul High Court. Qualcomm noted it will have to pay the fine within 60 days of the issuance of the written order, which could be adjusted or refunded based on the outcome of the appeal. “Qualcomm strongly disagrees with the KFTC’s announced decision, which Qualcomm believes is inconsistent with the facts and the law, reflects a flawed process and represents a violation of due process rights owed American companies under the Korea-U.S. Free Trade Agreement (KORUS),” the mobile chipmaker said.
Ordered to Renegotiate
On Wednesday, the KTFC ruled Qualcomm used its leading position in the mobile handset market to make device manufactures pay royalties for a set of patents they didn’t necessary need or use to get access to its modem chips. What’s more, the KTFC contends Qualcomm limited competition by balking at licensing patents that have to do with modem chips to competitors, which hurt sales and made them open to lawsuits. The regulator told Qualcomm it has to renegotiate agreements with handset makers if they request it, which could impact Qualcomm’s agreements with Intel Corp. (INTC), Apple Inc. (AAPL), Samsung and Huawei Technologies.
“Qualcomm strongly believes that the KFTC findings are inconsistent with the facts, disregard the economic realities of the marketplace, and misapply fundamental tenets of competition law,” said Don Rosenberg, executive vice president and general counsel at Qualcomm in the press release. “Importantly, this decision does not take issue with the value of Qualcomm’s patent portfolio. Qualcomm’s enormous R&D investments in fundamental mobile technologies and its broad-based licensing of those technologies to mobile phone suppliers and others have facilitated the explosive growth of the mobile communications industry in Korea and worldwide, brought immense benefits to consumers and fostered competition at all levels of the mobile ecosystem.”
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