Qualcomm forced Apple into exclusive chip deal, FTC says

Lawsuit accuses the world's biggest maker of mobile phone chips of maintaining a monopoly that extracted high royalty fees and weakened competition.

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Steven Musil
2 min read

Qualcomm is accused of anticompetive practices when it comes to licensing its patents.

Claudia Cruz/CNET

Qualcomm forced Apple to use its chips exclusively in exchange for lower licensing fees, excluding competitors and harming competition, the US said in a lawsuit Tuesday.

The lawsuit, filed by the Federal Trade Commission, accuses Qualcomm, the world's biggest maker of baseband processors for mobile phones, of maintaining a monopoly over chips for cellular phones through a "no license, no chips" policy. That policy imposed "onerous" supply and patent-licensing terms to extract high royalties from cell phone makers and weaken competitors, the commission said.

"Qualcomm recognized that any competitor that won Apple's business would become stronger, and used exclusivity to prevent Apple from working with and improving the effectiveness of Qualcomm's competitors," the FTC said in a statement.

The lawsuit continues a pattern of antitrust scrutiny directed at Qualcomm in recent years. Last month, the South Korean Fair Trade Commission hit the chipset maker with an $850 million fine for maintaining an "unfair business model" and creating a monopoly with its practices. In February, China fined Qualcomm almost $1 billion as part of a long-running antimonopoly investigation into the company.

In its heavily redacted complaint (PDF), the FTC said the patents Qualcomm held are standard-essential patents -- technology that is essential to the industry and must be licensed to competitors under fair, reasonable and nondiscriminatory terms (FRAND). But the complaint alleges that Qualcomm consistently refused to license some standard-essential patents to rival chipmakers, in violation of its FRAND commitments.

"Qualcomm's customers have accepted elevated royalties and other license terms that do not reflect an assessment of terms that a court or other neutral arbiter would determine to be fair and reasonable," the FTC said in its complaint.

The company said the FTC's lawsuit is based on "flawed legal theory."

"Qualcomm has never withheld or threatened to withhold chip supply in order to obtain agreement to unfair or unreasonable licensing terms," Qualcomm said in a statement. "The FTC's allegation to the contrary -- the central thesis of the complaint -- is wrong."

Apple did not respond to a request for comment.

Qualcomm shares fell 4 percent to $64.19 on news of the lawsuit.

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