April 20, 2024

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[THE INVESTOR] US chip giant Qualcomm on Dec. 28 vowed to appeal the record penalty imposed by Korea’s antitrust watchdog, warning that the ruling could run a foul of the free trade pact with the US.

After a long probe, the Fair Trade Commission concluded that Qualcomm was in violation of local competition laws by coercing smartphone and chipmakers to accept unfair patent licensing deals, and imposed an administrative fine of 1.03 trillion won ($853 million).

“This is an unprecedented and insupportable decision relating to licensing practices that have been in existence in Korea and worldwide for decades,” the San Diego-based firm said in a statement. 

In an unusually harsh tone, the company refuted the ruling, stating it will appeal the decision at the Seoul High Court after getting the formal written order.

“Qualcomm strongly disagrees with the announced decision, which it 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-US Free Trade Agreement,” the company said.

According to the regulators, Qualcomm arm-twisted smartphone makers, including Samsung and LG, to purchase a bunch of processor and network connection licenses, including some they don’t need, and charged them 3 to 5 percent of smartphone prices, instead of on the chipset prices that are worth less than 10 percent of the device prices, as royalty fees.

The chip company was also found to have shared less of its standard essential patents, which should be offered under non-discriminatory terms to any counterpart, while offering them to a selective few that agreed to unfair contract conditions.

Not just Korean tech giants Samsung Electronics and LG Electronics, but also their US peers like Apple, Intel and Nvidia are said to have testified about Qualcomm’s decades-old unfair business practices in an almost three-year investigation by Korean authorities.

“For decades, Qualcomm has worked hand in hand with Korean companies to foster the growth of the wireless Internet. Qualcomm’s technology and its business model have helped those companies grow into global leaders in the wireless industry. This decision ignores that win-win relationship,” said Don Rosenberg, executive vice president and general counsel, in a statement.

“Qualcomm’s repeated requests during the FTC’s investigation for basic due process rights such as access to the case files and the right to cross examine witnesses were denied. These rights and others are supposed to be guaranteed to US companies under the Korea-US FTA, yet the FTC declined to implement these fundamental procedural safeguards. We are pleased that our appeal will be to the Seoul High Court, which is known to rigorously analyze evidence and apply sound antitrust principles.”

Qualcomm will be required to pay the fine within 60 days of the issuance of the written order. The fine could be adjusted or refunded later depending on the outcome of the appeal.

Sources said the firm had asked to take voluntary corrective measures to avoid the fine at the last minute but the FTC denied the request.

By Alex Lee (alexlee@heraldcorp.com)