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FTC accuses Qualcomm of violating law on licensing

Korea’s Fair Trade Commission accused Qualcomm of violating local competition law in the way it licenses technology to customers, the chipmaker said.

The regulator proposes fining the company and forcing it to modify its business practices, Qualcomm said Tuesday in a statement. The commission sent a “case examiner’s report” to the U.S. company, beginning the process of allowing Qualcomm to respond to the allegations.

“The allegations and conclusions contained in the examiner’s report are not supported by the facts and are a serious misapplication of law,” Qualcomm said. “Our patent licensing practices, which we and other patent owners have maintained for almost two decades, and which have facilitated the growth of the mobile communications industry in Korea and elsewhere, are lawful and pro-competitive.”

Qualcomm gets the majority of its profit from licensing patents that cover some of the fundamental technology of modern phone networks. The chipmaker has faced regulatory challenges across the globe and earlier this year paid a fine and agreed to charge a smaller percentage on locally sold handsets in China. The company also is the subject of regulatory investigations in the United States and Europe.

Korea is home to Samsung Electronics and LG Electronics, the nation’s biggest consumer electronics makers and among Qualcomm’s top three customers. The San Diego-based chipmaker charges fees based on the selling price of handsets, which Korea is now challenging. The commission argues that the fee should be based on the price of the semiconductor component that uses the technology.

“Qualcomm has a dominance in Korea,” said Claire Kim, an analyst at Daishin Securities. “The Korean government can no longer tolerate this because Samsung is Korea’s biggest company, whose revenue doesn’t seem all that rosy.”

Qualcomm said the process of fighting its case with the Korean regulator will “take some time,” without being more specific, and it didn’t specify the potential size of the fine.

Bloomberg