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Qualcomm hit with $850M fine in South Korea antitrust probe

The sanction would be the largest antitrust fine in South Korean history.

Qualcomm faces a massive fine from the South Korean Fair Trade Commission.

Justin Sullivan, Getty Images

Qualcomm faces the largest antitrust fine in South Korean history, following a nearly three-year investigation from the South Korean Fair Trade Commission.

The commission accused the chipset maker of having an "unfair business model" and creating a monopoly with its practices. It fined Qualcomm more than 1 trillion won, or about $850 million.

Qualcomm plans to fight the fine, arguing that it had been following licensing practices that have existed in Korea and worldwide for decades. The company said its business model promotes competition and called the massive fine unreasonable.

"Qualcomm strongly believes that the KFTC findings are inconsistent with the facts, disregard the economic realities of the marketplace, and misapply fundamental tenets of competition law," Don Rosenberg, Qualcomm's general counsel said in a statement.

In its report, the KFTC pointed to Qualcomm's dominance of LTE chipsets, more than doubling from 34 percent in 2010 to 69 percent in five years, and the company's refusal to provide patent licensing to competing chipset companies.

Without the patents, competing companies created "flawed products," the KFTC found. The agency looked at 11 major chipset companies selected by Deutsche Bank in 2008 -- nine of which have stopped trying to compete with Qualcomm, the last survivor in September 2015.

The commission held hearings during its investigation with Samsung, Apple, Intel, Nvidia, MediaTek, Huawei and Ericsson.

"It is a structure under which handset companies have to bite the bullet and accept Qualcomm's license terms, even if they are unfair, because if the modem chipset supply is suspended, handset companies would face the risk of their entire business shutting down," according to its report.

By denying essential patents for its competitors, the KFTC argued Qualcomm had leverage over phone manufacturers and pressured companies into unfair deals. Part of its agreement with companies like Samsung, HTC and Huawei was that it would have to provide free-cross grants, adding to its fortress of patents -- while its competitors would have to pay royalties for the same patents.

The KFTC hit Qualcomm in December 2009 with a $225 million fine concerning market, which is pending in the South Korean Supreme Court.

In 2015, Qualcomm agreed to pay a $975 million fine in China after the country's own anti-monopoly investigation over its patent-licensing business.

The European Union has also opened two antitrust investigations into Qualcomm.

The KFTC still has to issue a written order before Qualcomm can legally dispute the fine in Seoul High Court. Orders can take up to six months to be released. The chip company will have 60 days to pay the fine after the order is issued.