Qualcomm fined $854M by South Korean antitrust regulators

A view of one of Qualcomm's many buildings in San Diego

A year after getting hit with a $975 million antitrust fine in China, Qualcomm Inc. is once again on the hook over its business practices.

The Korea Fair Trade Commission today ordered the chip maker to pay $854 million for what it has deemed to be anticompetitive behavior in the mobile processor market. Qualcomm, which reported revenues of $23.6 billion for the fiscal year ended Sept. 25, makes most of its profit from licensing semiconductor patents to handset and chip manufacturers. The commission claims that the company has abused its dominant market position to force unfair terms on its intellectual property clients.

The allegations consist of two parts. First, South Korea’s regulators claim that Qualcomm made handset makers buy more patents than they needed as part of licensing deals. Second, the commission accuses the chip maker of restricting access to its intellectual proprietary from competitors in the semiconductor market.

Because of the severity of the charges, the agency is demanding Qualcomm make a number of adjustments to its business practices on top of paying the $854 million fine. Today’s ruling orders the chip maker to renegotiate any existing patent agreements that may violate antitrust rules and negotiate in “good faith” with competing chip makers on licensing deals.

Stacy Rasgon, an analyst with investment firm AB Bernstein, told Reuters that the latter clause may have an even bigger impact on Qualcomm’s bottom line than the fine. Forcing the company to share patents with rivals such as Intel Corp. could allow them to develop more competitive chips, thus potentially diminishing the market advantage of Qualcomm products. That in turn would undermine its main source of profits.

As a result, it shouldn’t come as a surprise that Qualcomm has taken a bold stance against the ruling. Don Rosenberg, the company’s general counsel, said in a statement that the findings of the ruling are “inconsistent with the facts, disregard the economic realities of the marketplace, and misapply fundamental tenets of competition law.” He added that his team’s requests to cross-investigate the industry witnesses who consulted the commission were denied.

Qualcomm said it will file an immediate stay of the order, but ZDNet noted that the fine must be paid within the next 60 days. The company similarly appealed a 273 billion won ($225 million at the current exchange rate) that it had received in 2009. That case remains in South Korea’s Supreme Court to this day.

Qualcomm is facing similar antitrust concerns in a number of other countries including the U.S. and Taiwan. Chiu Yung-ho, the vice chairman and spokesman for Taiwan’s Fair Trade Commission, said in a statement to Reuters that today’s ruling will serve as an “important reference point” for his team. 

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