According to the government agency, which concluded a 17-month investigation into the matter, Qualcomm breached fair trade rules by abusing its position in the mobile processor market. The conclusion was that Qualcomm charged phone manufacturers excessively high licensing fees by basing its calculations on a phone’s wholesale price rather than its processors.
“Qualcomm has been collecting royalty fees from mobile phone manufacturers based on certain fixed rates from the suggested price of a mobile device,” said an FTC official. “Qualcomm should have sought royalty fees based on each chipset.”
The Korean newspaper reports that Qualcomm collects $1.27 billion annually in royalty fees from South Korean phone manufacturers like Samsung and LG, with the South Korean market accounting for 16 percent of Qualcomm’s sales last year. For its part, Qualcomm said that it significantly helped these phone makers become some of the top dogs in the phone market.
Whether or not there’s truth to that statement, the FTC may fine Qualcomm close to a billion dollars for its transgressions, with the government agency set to close the case by year’s end. If the number sticks, it will be the highest monetary penalty the FTC has ever issued toward a company.
As alluded to earlier, Qualcomm was fined $975 million by China’s National Development and Reform Commission (NDRC) in 2015 for abusing its position as market leader with high licensing costs and royalties. As a result of the anti-trust case, Qualcomm changed its licensing practices, with the company creating revised patent agreements after the case.
More recently, Qualcomm filed a complaint against Meizu, accusing the Chinese phone manufacturer of using its technologies without the correct licenses. The case is currently ongoing.
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