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Qualcomm hit with $853M fine by South Korea over antitrust issues

By Stephen Feller
Qualcomm hit with $853M fine by South Korea over antitrust issues
Qualcomm, whose booth at the 2015 Mobile World Congress is pictured, has been hit with a fine of more than $850 million by a South Korean agency for antitrust violations. Photo by Kārlis Dambrāns/Flickr.com

SEOUL, Dec. 28 (UPI) -- A South Korean regulatory commission fined Qualcomm more than $850 million on accusations it forced cell phone manufacturers into unfair licensing deals for its near-standard wireless technology chips.

The Korea Fair Trade Commission accused Qualcomm of breaking antitrust laws by limiting access of its customers to patents it licenses and forced phone companies into unfair deals because of the essential phone parts it makes, issuing the company an $852.9 million fine.

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Qualcomm charges royalties to companies that license its technology, and said its business practices are based on decades of standard practice and have not changed in recent years.

The KFTC says Qualcomm's refusal to license its chips to manufacturers of chips, focusing on phone manufacturers, is an unfair practice.

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"Qualcomm, a holder of standard-essential patents as well as a monopolistic service provider of modem chips from manufacturing to sales, has violated its agreement to license patents on fair reasonable and non-discriminatory terms, known as FRAND," the commission said in a statement.

About 30 percent of Qualcomm's revenue came from licensing its patents, which is often based on a percentage of the price of individual cell phones. In the case of a company like Samsung, Qualcomm sells the company chips for its smartphones, but the two also compete to make processor chips for the devices.

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If the fine stands, and Qualcomm has to change its practices, some experts suggest that could mean lower prices for companies like Samsung and LG.

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The fine would not be the first fine on charges of improper practice by the company, which received a $214 million in 2009 for overcharging companies that buy chips from companies other than Qualcomm and $975 million for regulatory issues in China last year.

Qualcomm's attorneys say the company has won many cases similar to this one in the past and expects to make clear that, aside from following longtime standard industry practice, profits from licensing fees are essential to research and design there.

Qualcomm's chief general counsel, Don Rosenberg, said in a statement the company believes it will come out ahead because South Korean regulators have never raised concern about their practices and suggests they may be trying to disrupt what has now been standard practice for decades.

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"We've seen time and again that those who actually apply the rule of law to this, come to the conclusion that nothing is wrong," Rosenberg said. "We're going to fight this the way we fought all of them. We think we'll have a much better time with the Korean courts than we had with the Korean Fair Trade Commission. We have a lot of faith in the independence of the courts."

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