Qualcomm’s method of conducting business has landed the company in hot soup as it is being sued by the United States Federal Trade Commission over “anti-competitive practices” due to the way the company sells modems for devices like smartphone.
The key to this suit is Qualcomm’s “no license, no chips” policy. This policy allows Qualcomm to refuse to sell its chip to companies that do not agree with its licensing terms. As Qualcomm is one of the only companies that can supply large quantities of high-end modems found on its chips, companies that do not agree with the terms would not be able to acquire enough chips to make enough phones.
On top of that, Qualcomm has also refused to license standard-essential patents to competitors despite the fact that the company is commited to such an action on fair, reasonable, and non-discriminatory (FRAND) terms. With Qualcomm refusing to license the patents to competing suppliers, this allows the company to overcharge phone makers.
Not surprisingly, Qualcomm has since stated that the FTC’s lawsuit is without merits. “The portrayal of facts offered by the FTC as basis for the agency’s case is significantly flawed. In particular, Qualcomm has never withheld or threatened to withhold chip supply in order to obtain agreement to unfair or unreasonable licensing terms. The FTC’s allegation to the contrary – the central thesis of the complaint – is wrongm” says a statement issued by Qualcomm.
This wouldn’t be the first time that Qualcomm’s business practices has landed the company in trouble. Both South Korean and Chinese regulators have found Qualcomm guilty over anti-competitive licensing terms, so it isn’t any surprise that the FTC believes that Qualcomm has done so as well. Qualcomm has stated that it intends to fight the case all the way to the federal court if necessary, so this saga will continue for quite a while more.
Source: The Verge, Federal Trade Commission
