Word comes out of South Korea today that the country’s antitrust regulatory authority, the Korean Fair Trade Commission (KFTC), has ruled against Qualcomm in an ongoing antitrust investigation and is fining the company $865 million. The product of a 3 year investigation, the KFTC has ruled that Qualcomm abused their market position with respect to how and to whom they licensed out access to various important cellular patents, refusing to license certain patents and unnecessarily bundling others.

This latest fine from South Korea comes as Qualcomm has been in the hot-seat with various nations’ regulators over the past couple of years, all of whom has been investigating Qualcomm for similar reasons. This includes China, who fined Qualcomm $975 million and imposed new licensing rules on the company back in February of 2015, and the EU, who still has their own antitrust investigation open. At the core of both cases has been how Qualcomm has handled and licensed its patent portfolio, and at times how this intersected with how the company sold & priced their own chips implementing those patents.

South Korea’s ruling marks the second time Qualcomm has been fined by a national regulator for anticompetitive actions in the past couple of years, and is the second time altogether that the country has fined Qualcomm (they were also fined in 2009 in a dispute over CDMA; the appeal is still pending). Similar to last year’s case in China, the crux of the issue in the KFTC’s ruling appears to have been Qualcomm’s bundling of patents for chip customers, which the KTFC has ruled forced customers to license patents they did not need. Meanwhile the KFTC is also taking Qualcomm to task over their unwillingness to license standards-essential cellular technology patents to rivals, which restricted their ability to compete with Qualcomm. As it would not be possible to build standards-compliant modems without infringing on those patents, competing products would be open to lawsuits from Qualcomm.

Along with the $865 million fine, the KFTC is also ordering Qualcomm to change their business practices to put an end to their illegal behavior. This includes ending patent bundling and renegotiating patent licensing deals with customers if requested, and to properly negotiate the licensing of patents with rivals on a good faith basis.

In a response to the KFTC’s ruling, Qualcomm has released their own statement, stating that they disagree with KFTC’s ruling on the grounds that it violates international trade agreements, that no harm has been done to the market, and that the KFTC did not question Qualcomm’s licensing model in their previous CDMA investigation. Qualcomm has also said that once the formal written order from the KFTC comes out – a process that can take months – they will immediately appeal the order and the fine. Meanwhile it’s worth noting that this is the first such case where Qualcomm is appealing the ruling; in the China ruling, Qualcomm entered into an agreement with Chinese regulators to accept the fine and new patent licensing rules in order to end the investigation.

Source: Reuters

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  • webdoctors - Wednesday, December 28, 2016 - link

    Wow, thats a crazy amount of money! How would this work, Korea fines QCOM, QCOM raises the licensing/chip prices Samsung pays and QCOM gets paid back the money from Samsung the next quarter?

    I can't imagine anyone else except maybe LG complaining to Korea/Samsung oligarch about the QCOM abuse.
  • Lolimaster - Wednesday, December 28, 2016 - link

    Maybe they should add a ban of QCOM socs from any SK based company product. That will hurt.
  • ddriver - Wednesday, December 28, 2016 - link

    Samsung has become too big for its own good, or more accurately, for its master's good. Samsung will be split into pieces in the years to come, and its destruction will come from within. The note 7 fiasco has lit the fuse. The downside of being a de facto colony of the US under permanent military occupation - you are not allowed to go against your master's interests.
  • Morawka - Wednesday, December 28, 2016 - link

    qualcomm owns to many patents to fail man. i would have agree'd with you a year ago, but right now, there just isn't any serious competition. Qualcomm can offer 1 LTE modem that covers all worldwide bands, plus has your CPU cores of choice. Intel tried this year with the iPhone, and the modem is substandard compared to qualcomm's.

    They also keep innovating every year giving device makers turn-key solutions. BUT qualcomm charges something like 5% of the MSRP of the device, but only if it works in qualcomm's favor. If the device has a low MSRP, qualcomm will outright refuse to license it. they wanna make a solid $75 plus per handset sold.
  • sleepeeg3 - Thursday, December 29, 2016 - link

    5% of even an $800 phone would not be $75. Qualcomm has a break even point where they lose money.
  • marcolorenzo - Friday, December 30, 2016 - link

    He said Samsung, not Qualcomm.
  • Haul22 - Thursday, December 29, 2016 - link

    Samsung is far older and far more profitable than Qualcomm. It remains under the control of the founder's family, and no country's regulatory agencies have called for its breakup, so I don't know why you think it will be split. You are correct that you can't go against your master's interests. Samsung is Qualcomm's master in two key ways: 1) the Exynos line has far surpassed the Snapdragons in performance and 2) Samsung will be manufacturing Qualcomm's flagship Snapdragon 835. Any attempt by Qualcomm to jack up licensing fees on Samsung will be met with jacked up manufacturing fees, but regardless, Qualcomm would never be that petty. They will continue to do whatever they can to sell Snapdragons to Samsung for use on their low end and CDMA phones, and they will continue to try to license patents to Samsung. A decision by South Korea's regulatory agencies (not Samsung) won't change their business alliances.
  • ddriver - Thursday, December 29, 2016 - link

    What really matters here is that S. Korea's master is the USA, and Qualcomm is a US corporation. Having a little faster SOC doesn't mean much. Nor the fact that samsung will be making it, this is their business, they are not doing any favors to QC, if they don't do it other foundries will.

    The direct problem is that samsung has become a threat to crapple, and when crapple got fined 14 billion $ over tax evasion some US high level politicians went as far as to call it "an attack on US national interests". Then suddenly, and very conveniently, the latest and greatest note 7 ends up an 8 billion $ fiasco, resulting in a healthy boost to the otherwise mediocre iphone 7.

    I am not the kind of person who believes in coincidences that are too coincidental and too convenient, or that god loves crapple. IMO the note 7 was deliberately sabotaged, either internally at samsung, or via interception and tampering with shipments. Sounds crazy, some might say, however, I will refer back to the "threat to US national interests" part, and that intercepting and tampering with electronic product shipments is neither far-fetched nor unprecedented - the NSA has done it for years, in the name of national interests. Of course, judging by their corporate decisions, there are at least some in the board of directors that would be willing to ruin the company, and possibly in order, more technical departments as well. We will have to wait on the results from the official investigation, not that they are guaranteed to be true but still...

    Samsung has become too much a thorn in the eye, and with S. Korea being a de-facto US proxy, it isn't really allowed to do that. Samsung is vertically integrated, they make everything they put in their products, chips, pcbs, batteries, displays, thus they are in a position to be extremely competitive. And a US proxy is not allowed to eclipse its master, thus I suspect the years ahead will be about pecking apart and downsizing samsung into a less capable corporate entity.
  • johnnycanadian - Thursday, December 29, 2016 - link

    You could have stopped at "Sounds crazy".
  • webdoctors - Friday, December 30, 2016 - link

    Is this the prologue to some script you're trying to sell to Hollywood?

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