FTC cuts Qualcomm’s 2009 fine

The Fair Trade Commission (FTC) reduced by 18 percent a fine levied against Qualcomm for unfair trade practices.

In a statement released Thursday, the antitrust regulator said it will follow a Supreme Court ruling and cut 48.6 billion won ($43 million) from the original 2009 fine, taking the total down to 224.5 billion won.

The commission had found in its original determination that the chipmaker had disrupted the market by offering discriminatory discounts and conditional rebates to phone makers. It imposed its highest-ever fine.

“The Supreme Court’s ruling is a reminder to companies that misuse of market dominance to exclude competitors is unacceptable,” the FTC said. “It is meaningful that the court demonstrated how unlawful it is to use conditional rebates as a means of blocking competitors.”

The FTC found in 2009 that Qualcomm charged phone makers higher royalties for its code division multiple access (CDMA) chips if they bought modem chips made by Qualcomm’s competitors.

Qualcomm received 5 percent of handset prices in royalties for CDMA chips from handset makers, such as Samsung Electronics and LG Electronics, if the makers bought its modem chips. The chips in question are key components in the conversion of the human voice to digital signals. The U.S. chipmaker charged a royalty of 5.75 percent when handset makers purchased modem chips from rivals, such as Taiwan’s VIA or Korea’s EoNex.

The FTC said Qualcomm also offered rebates to handset makers on the condition they purchase its modem and radio frequency chips.

Through use of such practices since 2004, the chipmaker limited competition through monopolistic behavior, the FTC said at the time of the original determination. Qualcomm’s share in the local modem chip market climbed from 98.6 percent in 2004 to 100 percent in 2006 and 2007.

The San Diego-based chipmaker paid the fine but filed a lawsuit objecting to the decision.

After series of legal proceedings, the Supreme Court ruled in January this year that FTC’s penalty was not completely lawful. It determined that the increasing use of Qualcomm chips did not hinder competition as much as the commission had claimed.

The FTC adjusted its penalty Thursday in accordance with the court ruling, deducting around 18 percent of the original fine. When Qualcomm requests a return of the difference, the agency will be obliged to pay a total of approximately 63 billion won, which includes around 15 billion won of accumulated interest.

Qualcomm is currently involved in a separate lawsuit against the FTC over the agency’s 2016 decision to fine the chipmaker 1.03 trillion won over an alleged monopoly on chip supplies and patent rights.

BY KO JUN-TAE [ko.juntae@joongang.co.kr]