Shares in Qualcomm have dropped sharply after US regulators charged the company with using anti-competitive tactics over licensing.
The Federal Trade Commission alleges that Qualcomm received high royalties for patented technologies that are ‘essential to industry standards.’ That creates, in effect, a ‘tax’ on manufacturers using competing processors, the FTC said.
The FTC claims that Qualcomm’s refusal to license patents to competing suppliers, and its exclusive relationship with Apple, inhibits competition.
‘By excluding competitors, Qualcomm impedes innovation that would offer significant consumer benefits, including those that foster the increased interconnectivity of consumer products, vehicles, buildings, and other items commonly referred to as the Internet of Things,’ the FTC said in a statement.
The FTC asked the U.S. District Court for the Northern District of California in San Jose to order Qualcomm to end these practices.
But Qualcomm says that the FTC's complaint is based on ‘flawed legal theory, a lack of economic support and significant misconceptions about the mobile technology industry’, and Don Rosenberg, executive vice president and general counsel at Qualcomm, said the company has "grave concerns" about the decision to file the complaint just before the handover to a new federal administration.
‘The complaint seeks to advance the interests and bargaining power of companies that have generated billions in profit from sales of products made possible by the fundamental 3G and 4G cellular technology developed by innovators like Qualcomm,’ the company said. ‘The portrayal of facts offered by the FTC as the basis for the agency's case is significantly flawed. In particular, Qualcomm has never withheld or threatened to withhold chip supply in order to obtain agreement to unfair or unreasonable licensing terms. The FTC's allegation to the contrary - the central thesis of the complaint - is wrong.’
The moves come against a history of antitrust rulings and investigations into Qualcomm from regulators across the globe. In February 2015, Qualcomm paid a $975 million fine in China following a 14-month probe, and South Korea fined Qualcomm Inc 1.03 trillion won ($854 million) in December 2016 for what it called unfair practices in patent licensing. In December 2015, the European Union accused Qualcomm of abusing its market power in competition violations dating back to 2011.
The news will further unsettle Qualcomm shareholders, already spooked by the prospect that mobile manufacturers may look elsewhere for chips. Samsung for instance announced some time ago that it would be using its own 10-nanometer devices instead of Qualcomm’s 14-nanometer chips in a new generation of mobiles.