Man in violation of privacy law

Breaking news and expert analysis on legal and compliance issues

[Back To Home][Back To Archives]

From Antitrust Law Daily, December 28, 2016

Qualcomm fined $853M by South Korea antitrust agency for abuse of dominance

By Linda O’Brien, J.D., LL.M.

Following a three-year investigation, the Korea Fair Trade Commission (KFTC) has determined that certain business practices of Qualcomm Inc. are in violation of Korean competition law and has imposed an $865 million administrative fine. The fine is the largest sanction imposed in the agency’s history, the agency has announced.

Qualcomm is a U.S. semiconductor and telecommunications equipment company that supplies the processors and modems used in many wireless devices, such as Apple’s iPhones. The company derives most of its revenue from chip making and profit from its patent licensing businesses.

According to the KFTC, Qualcomm holds standard essential patents (SEPs) in regard to cellular communication standard technologies. An SEP holder has a commitment to license patent users on fair, reasonable, and non-discriminatory terms (FRAND). By linking the chipset supply with patent license agreements, Qualcomm has allegedly coerced the execution and performance of unfair license agreements by using its chipset supply as leverage, while circumventing FRAND commitment.

Qualcomm has purportedly provided handset companies with only comprehensive portfolio licenses and coerced unilaterally determined royalty terms without conducting a procedure to calculate fair compensation, while coercing unfair agreements, such as demanding handset companies to license their patents for free. The KFTC is the first to rectify Qualcomm's unfair business model, under which Qualcomm has refused to license competing chipset companies while coercing unilateral license terms on handset companies in order to strengthen its monopolistic power in the patent license market and the chipset market. This business practice is an abuse of market dominance, the KFTC concluded.

In a statement released by Qualcomm, the company responded that it 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 KFTC’s decision will not become effective until the written decision and order is issued, which typically has taken four to six months in prior cases. Following receipt of the KFTC’s written order, Qualcomm indicated that it will file for an immediate stay of the order and appeal the KFTC’s decision to the Seoul High Court. Qualcomm will also appeal the amount of the fine and the method used to calculate it.

If the Commission's ruling is affirmed, in addition to a fine, Qualcomm will have to ensure fair terms for contracts and open up licensing for its key patents, including making them available separately from chip orders.

Companies: Qualcomm Inc.

MainStory: TopStory Antitrust

Back to Top

Antitrust Law Daily

Introducing Wolters Kluwer Antitrust Law Daily — a daily reporting service created by attorneys, for attorneys — providing same-day coverage of breaking news, court decisions, legislation, and regulatory activity.


A complete daily report of the news that affects your world

  • View full summaries of federal and state court decisions.
  • Access full text of legislative and regulatory developments.
  • Customize your daily email by topic and/or jurisdiction.
  • Search archives for stories of interest.

Not just news — the right news

  • Get expert analysis written by subject matter specialists—created by attorneys for attorneys.
  • Track law firms and organizations in the headlines with our new “Who’s in the News” feature.
  • Promote your firm with our new reprint policy.

24/7 access for a 24/7 world

  • Forward information with special copyright permissions, encouraging collaboration between counsel and colleagues.
  • Save time with mobile apps for your BlackBerry, iPhone, iPad, Android, or Kindle.
  • Access all links from any mobile device without being prompted for user name and password.