Qualcomm, in Deals With Apple and Others, Violated Competition Laws, Says FTC

The chip manufacturer's exclusive agreement with the iPhone maker unfairly locked out competitors, the FTC said.
Qualcomm, in Deals With Apple and Others, Violated Competition Laws, Says FTC
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Qualcomm used anticompetitive tactics to impose unfair conditions on its customers and weaken its competitors, according to a lawsuit that the Federal Trade Commission filed Tuesday.

The San Diego company makes the processors found in many smartphones and other mobile devices, from flagship handsets like the Samsung Galaxy S7 to lower-end Android models. Its Snapdragon processors also power many models of the iPhone, and its arrangement with Apple drew particular scrutiny from the FTC, which claimed that Qualcomm requested exclusivity from Apple in exchange for reduced patent royalties.

 
 
 

The agreement with Apple was in effect from 2011 until last year, and prevented the iPhone maker from buying chips from Qualcomm's competitors, according to the FTC complaint. Like other smartphone companies, Apple wanted the option to use other processors, but Qualcomm imposed royalty payments for its technology that made buying its competitors' products less attractive.

"When Apple sought relief from Qualcomm's excessive royalty burden, Qualcomm conditioned partial relief on Apple's exclusive use of Qualcomm baseband processors," according to the complaint. The FTC claimed that Qualcomm's actions violate U.S. competition law, and asked the court to bar it from making further anticompetitive agreements.

Apple did not immediately respond to a request for comment.

In a statement, Qualcomm said that the FTC lawsuit was flawed, and that the agency's requests would bolster the sales of competing products at Qualcomm's expense. Qualcomm also noted that one FTC commissioner, Maureen Ohlhausen, dissented from the majority decision to file the lawsuit.

"I have been presented with no robust economic evidence of exclusion and anticompetitive effects," Ohlhausen wrote in a statement. "What I have been presented with is simply a possibility theorem."

Qualcomm said that it has "never withheld or threatened to withhold chip supply in order to obtain agreement to unfair or unreasonable licensing terms," according to the company's statement. "The FTC's allegation to the contrary -- the central thesis of the complaint -- is wrong."

Although this is the first anticompetitive lawsuit of its magnitude that Qualcomm has faced in the U.S., it has been the target of multiple suits from Korean antitrust regulators. The most recent of those was filed last month, when South Korea's antitrust agency proposed a record $854 million fine against Qualcomm for negotiating unfair licensing agreements.


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