South Korea fines Qualcomm $854 million for violating competition laws

Wed Dec 28, 2016 4:54pm EST
 
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By Se Young Lee and Stephen Nellis

SEJONG, South Korea/SAN FRANCISCO (Reuters) - South Korea's antitrust regulator fined Qualcomm Inc (QCOM.O: Quote) 1.03 trillion won ($854 million) for what it called unfair business practices in patent licensing and modem chip sales, a decision the U.S. chipmaker said it will challenge in court.

The fine, the largest ever levied in South Korea, marks the latest antitrust setback for Qualcomm's most profitable business of licensing wireless patents to the mobile industry, at a time when the business is facing headwinds from a cooling smartphone market. Shares in Qualcomm fell 1.7 percent on Nasdaq.

The Korea Fair Trade Commission (KFTC) ruled on Wednesday Qualcomm abused its dominant market position and forced handset makers to pay royalties for an unnecessarily broad set of patents as part of sales of its modem chips.

Qualcomm also restricted competition by refusing or limiting licensing of its standard essential patents related to modem chips to rival chipmakers such as Intel Corp (INTC.O: Quote), Samsung Electronics Co Ltd (005930.KS: Quote) and MediaTek Inc (2454.TW: Quote), the regulator said, hindering their sales and leaving their products vulnerable to lawsuits.

The regulator ordered Qualcomm to negotiate in good faith with rival chipmakers on patent licensing and renegotiate chip supply agreements with handset makers if requested -- measures that would affect the U.S. firm's dealings with major tech companies including Apple Inc (AAPL.O: Quote), Intel, Samsung and Huawei Technologies Co Ltd [HWT.UL] if upheld.

The KFTC said it began its investigations into Qualcomm's practices in 2014 following complaints from industry participants, but did not name specific companies.

Foreign companies including Apple, Intel, MediaTek and Huawei expressed their views during the regulator's deliberation process, KFTC Secretary General Shin Young-son told a media briefing in the country's administrative capital.

"We investigated and decided on these actions because Qualcomm's actions limit overall competition," Shin said, adding that the ruling was not about protecting domestic companies such as Samsung and LG Electronics Inc (066570.KS: Quote).   Continued...

 
A Qualcomm sign is pictured in front of one of its many buildings in San Diego, California November 5, 2014.  REUTERS/Mike Blake/File Photo