China taps South Korea for ideas in Qualcomm antitrust case

Thu Aug 21, 2014 5:10am EDT
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By Michael Martina and Se Young Lee

BEIJING/SEOUL (Reuters) - Chinese antitrust officials have met with their South Korean counterparts to discuss violations by U.S. chipmaker Qualcomm Inc (QCOM.O: Quote), sources said, as Beijing reaches out to regulators overseas to complete a case that could result in record fines at home.

Qualcomm is one of at least thirty foreign firms to come under scrutiny as China seeks to enforce a 2008 anti-monopoly law - efforts some critics say have unfairly targeted overseas businesses, raising protectionism concerns.

The Korea Fair Trade Commission (KFTC) fined San Diego-based Qualcomm more than $200 million in 2009 for abusing its dominant market position, but the stakes are bigger in China, where an investigation by the National Development and Reform Commission (NDRC) could trigger changes to Qualcomm's licensing deals and fines of as much as a tenth of a company's annual revenue.

Qualcomm had total revenue of almost $25 billion in the year to Sept. 29, 2013, about half of it in China.

"The Chinese authorities were very interested in how South Korea handled such issues and asked a lot of questions about South Korea's experiences," said a person who was present at meetings in May and June between the KFTC and the NDRC's price supervision and anti-monopoly bureau.

It's unlikely the NDRC could use exactly the same rationale as South Korea against Qualcomm, added the person, who didn't want to be named because of the sensitivity of the case.

"What China takes most exception to is that royalties on intellectual properties are comparatively higher in China. But high price itself shouldn't be an antitrust matter. It's only a problem when there are elements like discriminatory practices," the person said.

Qualcomm has been under investigation by the NDRC, one of China's three antitrust regulators, since November last year over how it licenses its patents and prices its chipsets.   Continued...

A man walks past a Qualcomm advertising logo at the Mobile World Congress at Barcelona, February 27, 2013. REUTERS/Albert Gea