South Korea's antitrust regulator KFTC (Korea Fair Trade Commission) imposed a hefty penalty on the U.S.-based chip maker Qualcomm for what it deems unfair business practices in patent licensing and modem chip sales. Qualcomm has been ordered to pay approximately 1.03 trillion South Korean Won or $865 million, which is the largest fine ever levied in South Korea.
The KFTC accuses Qualcomm of abusing its dominance in the market and forcing mobile manufacturers to pay royalties for an array of patents bundled in the sales packages of its modem chips. The commission also states that Qualcomm's business practices has restricted competition, further ordering the chip maker to negotiate with its rivals on patent licensing and chip supply.
KFTC's fine, which follows years of investigations, is the latest setback for Qualcomm, which makes most of its profits by selling wireless patents to the mobile industry. According to a Bloomberg report, Qualcomm makes about $6.5 billion through its licensing deals with mobile companies.
If the KFTC's order is upheld, Qualcomm stands to lose a lot more than just millions of dollars in fine. In an expected move, the chip maker said that it will fight the decision in court due to the KFTC's inconsistency in the investigation.
The chip maker also questioned KFTC's investigation process, where it was denied access to the case files and the rights to cross-examine witnesses, which is a lawful claim under the Korea-U.S. Free Trade Agreement (KORUS).
"For decades, Qualcomm has worked hand-in-hand with Korean companies to foster the growth of the wireless Internet. Qualcomm's technology and its business model have helped those companies grow into global leaders in the wireless industry. This decision ignores that win-win relationship," Don Rosenberg, executive vice president and general counsel at Qualcomm, said in a statement.
"We are pleased that our appeal will be to the Seoul High Court, which is known to rigorously analyze, evidence and apply sound antitrust principles," Rosenberg said.
The KFTC's order is not official until a written decision and order is processed, which would take months. The chip maker is prepared to appeal at the time, although the company must pay the said fine within 60 days of the written order. Based on the outcome of the appeal, Qualcomm will be subjected to adjustment or refund, according to ARS Technica.
Not the first time...
This is not the first time Qualcomm has been in the crosshairs of regulatory investigations. In 2015, the company paid $975 million in fine to China and was accused by the European Union of abusing its dominant position in the market. In 2009, the KFTC had imposed a 273 billion won fine on Qualcomm, which was the highest at that time, for abusing its market power. The company is also being looked into by other countries, including the U.S. and Taiwan, and South Korea's move sets a benchmark for others.