Qualcomm's anti-competitive business practices get support from the Trump administration

Qualcomm's anti-competitive business practices get support from the Trump administration
Back in May, Judge Lucy Koh (of Apple v. Samsung fame) made a ruling that still might change the way Qualcomm sells its chips to phone manufacturers. The judge ruled in favor of the Federal Trade Commission and against the chipmaker after a 10-day non-jury trial was held at the beginning of the year. The FTC argued that Qualcomm's "no license, no chips" policy is anti-competitive.

Other Qualcomm policies attacked in court included the way royalty payments are calculated based on the entire price of a phone instead of the chip being used. And Qualcomm was also cited for not licensing its standards-essential patents (SEP). These are patents that must be licensed by rivals to guarantee that their products meet technical standards; as a result, they are supposed to be licensed on a fair, reasonable and non-discriminatory fashion (FRAND). In its defense, Qualcomm says that the argument of royalties is an issue of contracts law that should not be heard in a forum designed for antitrust cases. And it also says that there is nothing wrong with getting compensated for the money it spends on R&D.

The FTC is opposed by Qualcomm, the DOJ, the Defense Department, and the Energy Department

In her decision, Koh said that Qualcomm needs to renegotiate its current contracts with phone manufacturers. In her written decision, Judge Koh said, "Qualcomm’s licensing practices have strangled competition in the CDMA and the premium LTE modem chip markets for years, and harmed rivals, OEMs, and end consumers in the process." As you might expect, Qualcomm has appealed the decision and even managed to get the Ninth U.S. Circuit Court of Appeals to issue a stay. This prevents Qualcomm from having to follow Koh's orders until all of its legal options have been exhausted. The firm did have a compelling reason to request a stay; it would be a waste of time and energy to renegotiate all of its contracts only to win on appeal and reverse all of the changes made.

And speaking of the appeal, the FTC is actually on the opposite side of the Trump administration. Before Judge Koh released her decision, Trump officials asked her to limit any penalties that she was planning to impose on the chipmaker. And now that the case is being heard in appeals court, the administration is concerned that a Qualcomm loss will negatively impact America's global leadership in technology and national security. And the Justice Department, under the leadership of U.S. Attorney General William Barr, has contradicted the FTC by stating that there is nothing anti-competitive about Qualcomm's business practices. That is unusual because the FTC and the DOJ both handle antitrust cases. The Justice Department is joined by the Defense Department and Energy Department which told the appeals court that a ruling against Qualcomm could affect the country's military and its energy and nuclear infrastructure.

But perhaps even more important to the Trump administration is the possibility that should Qualcomm lose on appeal, it will negatively impact the rollout of 5G in the states. The next generation of wireless connectivity will initially deliver download data speeds 10 times faster than 4G LTE and will lead to the creation of new businesses and industries. The nations that harness 5G first will have a big advantage in the global economy. Qualcomm's Snapdragon X50 and X55 modem chips allow smartphones to connect to 5G networks. The former is compatible with super zippy ultra-high mmWave spectrum while the latter works with both mmWave and sub-6GHz  airwaves.

But as far as the FTC is concerned, Qualcomm and the Justice Department have not shown how Judge Koh's ruling "threatens national security in any way -- or how those considerations could justify allowing Qualcomm to continue to violate" U.S. antitrust law. The 9th circuit appeals court, located in San Francisco, could start hearing arguments in February and issue a ruling sometime in 2020. For Qualcomm, there is plenty at stake.



1. MsPooks

Posts: 247; Member since: Jul 08, 2019

The 9th Circuit isn't going to change anything, so....

11. TadTrickle

Posts: 115; Member since: Apr 08, 2019

The most overturned court in the country

2. domfonusr

Posts: 1094; Member since: Jan 17, 2014

What a pickle we have gotten ourselves into... break up Qualcomm, and you damage the future of US defense, communication, and energy infrastructure - leave Qualcomm alone, and you tolerate the stranglehold of a near-monopoly of global scale on OEM's and consumers everywhere. Its just one of those "danged if you do - danged if you don't" scenarios.

6. Cicero

Posts: 1149; Member since: Jan 22, 2014

Apple start this when they didn't like Qualcomm's price policy. They think QC can be greedy than them.

8. Back_from_beyond

Posts: 1475; Member since: Sep 04, 2015

The solution seems simple, allow current contracts to expire, allowing Qualcomm to maintain its income for the next few years because a few major contracts have just been renewed, set up new guidelines that new contracts have to adhere to for future competitiveness, force Qualcomm to make more of their technology licensable at reasonable rates to encourage growth of competitors and see what happens.

3. RevolutionA

Posts: 529; Member since: Sep 30, 2017

That's not anti competitive

4. Alcyone

Posts: 582; Member since: May 10, 2018

That's a slippery slop at it's finest. Imo, Qualcomm's business ethics are not honorable. Charging a royalty price for the entire device, when it's just a component. Really? Imagine if that situation occurred in automobile sells. Charging for the one part is appropriate. Maybe, one reason why phone prices are now astronomically high. Gotta make up that extortion payout.

10. shm224

Posts: 306; Member since: Mar 19, 2015

No, Qualcomm isn't what allows Apple to gouge prices for their phones -- there are many affordable Android devices using the same chips made by Qualcomm. Apple iPhones are first and foremost a communication device and the value created by Qualcomm's patents/chip is what drives sales of Apple iPhones -- their per end-user device licensing fee is more than justified.

5. MrSnrub unregistered

That's why antitrust needs to be practiced like cancer screening: early and proactive. Now you're at a point where it may hurt the patient to stave the rot.

9. Vancetastic

Posts: 1797; Member since: May 17, 2017

Agreed. It's becoming far too easy for these companies to monopolize these days. Teddy Roosevelt is rolling over...

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