Qualcomm’s legal problems are growing. This afternoon the United States Federal Trade Commission, which has been investigating Qualcomm for possible anti-trust issues since 2014, has moved on to the next stage in their investigating by formally charging the company with multiple antitrust violations. This is the latest in a series of moves from national regulatory authorities, which has seen China, South Korea, and the European Union all fine, settle with, or investigate the company.

As with the cases against Qualcomm in other nations, much of FTC’s suit sounds similar: that Qualcomm refused to follow FRAND practices on its patents, and that it used its leverage to force device manufacturers to use its modems by making competing modems more expensive via royalties. Furthermore the FTC also alleges that Qualcomm worked to prevent the adoption of competing (non-LTE) technologies altogether.

The FTC summarizes their key points as follows:

  1. [Qualcomm] Maintains a “no license, no chips” policy under which it will supply its baseband processors only on the condition that cell phone manufacturers agree to Qualcomm’s preferred license terms. The FTC alleges that this tactic forces cell phone manufacturers to pay elevated royalties to Qualcomm on products that use a competitor’s baseband processors. According to the Commission’s complaint, this is an anticompetitive tax on the use of rivals’ processors. “No license, no chips” is a condition that other suppliers of semiconductor devices do not impose. The risk of losing access to Qualcomm baseband processors is too great for a cell phone manufacturer to bear because it would preclude the manufacturer from selling phones for use on important cellular networks.
  2. Refuses to license standard-essential patents to competitors. Despite its commitment to license standard-essential patents on FRAND terms, Qualcomm has consistently refused to license those patents to competing suppliers of baseband processors.
  3. Extracted exclusivity from Apple in exchange for reduced patent royalties. Qualcomm precluded Apple from sourcing baseband processors from Qualcomm’s competitors from 2011 to 2016. Qualcomm recognized that any competitor that won Apple’s business would become stronger, and used exclusivity to prevent Apple from working with and improving the effectiveness of Qualcomm’s competitors.

Points 1 and 2 are fairly straightforward. If Qualcomm was not licensing their patents out at all, or not licensing them under FRAND terms, then that would allow the company to discourage the use of competing modems, either via royalties or the risk of a lawsuit for violating their patents. Qualcomm holds a number of standards-essential patents for both CDMA and LTE, with both network technologies seeing heavy use in the roughly decade-long time period the complaint covers.

Similarly, once device vendors agree to use Qualcomm’s chips, Qualcomm is also accused of forcing them to accept the company’s patent licensing terms, which according to the FTC is not a standard industry practice. The end result being that device vendors would be locked into paying higher patent royalties.

But perhaps the most interesting – and certainly most novel – aspect of the FTC’s complaint is specifically the company’s agreement with Apple. In their complaint, the FTC alleges that Qualcomm forged a deal with Apple specifically to prevent competitors (e.g. Intel) from getting a foothold in the market and eroding Qualcomm’s dominance. This aspect of the FTC’s complaint also extends to competing technologies, with the FTC further accusing Qualcomm of forging agreements with Apple in part to prevent the adoption of WiMax, which is now a failed standard that was overtaken by the more Qualcomm patent-heavy LTE.

Ultimately in filing this complaint, the FTC is looking to force Qualcomm to halt what the commission sees as anticompetitive actions and to ensure a competitive market for cellular modems/basebands. It’s worth noting that as this is just the initial complaint, unless the FTC and Qualcomm were to settle early, this likely will be a multi-year legal battle just to prove or disprove the FTC’s complaints (and that doesn’t include any potential remedies/fines). At the same time, LTE is now well-entrenched and 5G technology is under development, so the market won’t be standing still one way or another while this case is going on.

Finally, in response to the FTC’s complaint, Qualcomm has issued their own press release denying the allegations against them. Along with refuting the FCC’s claim that they withheld chips, the company is also voicing their disagreement at the FTC’s underlying legal theory and what they see as a lack of evidence. The company is also questioning the timing of the suit, noting that it comes days before the new presidential administration takes power, insinuating that the suit was filed now to get the case started before the new administration (and its appointed FTC members) took control.

Source: United States FTC

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  • invinciblegod - Tuesday, January 17, 2017 - link

    Ironic that the Intel who paid PC manufacturers to exclude AMD was handicapped with the same method by Qualcomm.
  • thestryker - Tuesday, January 17, 2017 - link

    In my estimation it's even worse as you're right they're doing the same type of stuff as Intel, who got caught and fined massive amounts as well as being under extra scrutiny. Unlike Intel vs AMD however there are market players with huge capital who can fight in the mobile market whereas AMD was somewhat crushed by what had happened. This could easily have relatively quick impact in the mobile space.
  • ddriver - Tuesday, January 17, 2017 - link

    "fined massive amounts"

    It was literally crumbs. The amount of money intel was fined and hat to pay is a fraction of the damage they inflicted and the money they made on it. As far as intel is concerned, that is a win. They already inflicted irreversible damage than rendered their sole competitor effectively and perpetually impotent, and all they received was a slap on the wrist, while getting to keep their monopoly.
  • Nagorak - Tuesday, January 17, 2017 - link

    Yeah, I don't have any sympathy for Intel in this case. Turnabout's fair play, as far as I'm concerned.
  • beginner99 - Wednesday, January 18, 2017 - link

    It' did not matter at that time as AMDs fab were running 100% and they could not have produced more chips anyway. So it was kind of a dumb move from Intel.
  • Samus - Wednesday, January 18, 2017 - link

    Intel wasn't trying to hold back AMD's sales, they were trying to hold back their name recognition, particularly by restricting sales through Dell (the largest PC maker at the time) which crippled them when they ramped up production. The lost revenue during that period (they produced tens of thousands of chips they couldn't even sell around the time the Core 2 Duo launched in 2005-2006) was destructive to AMD's long term R&D and they have never rebounded with architecture or process competitiveness.

    As far as Qualcomm goes, it is downright damning to restrict sales of modems or other auxiliary components to an OEM that isn't buying your SoC's. It's hard to imagine they thought they would even get away with it since there are so many OEMs they've been doing this too and they all have evidence.
  • Oxford Guy - Wednesday, January 18, 2017 - link

    "Intel wasn't trying to hold back AMD's sales, they were trying to hold back their name recognition, particularly by restricting sales through Dell (the largest PC maker at the time) which crippled them when they ramped up production. The lost revenue during that period (they produced tens of thousands of chips they couldn't even sell around the time the Core 2 Duo launched in 2005-2006) was destructive to AMD's long term R&D and they have never rebounded with architecture or process competitiveness."

    Don't forget how AMD's processors weren't using SSE2 at all with programs compiled with the Intel compiler because of the "Genuine Intel" trick. I think that led to 3DMark being drastically distorting for AMD in addition to other problems.
  • Samus - Wednesday, January 18, 2017 - link

    But in reality, at least those in the know (who read sites like Anandtech or magazines like CPU) knew in day-to-day tasks AMD delivered an overall better performance through the entire Netburst-generation of Intel products, and was entirely competitive with Intel up until the Nehalem microarchitecture in performance.

    SSE2 hurt benchmarks and some professional applications but most programs and games optimized for "Genuine" Intel didn't show substantial gains because the floating point performance of the Athlon was very competitive with the Core microarchitecture, which depended on large caches to best AMD, something sadly AMD couldn't implement, being so far behind on manufacturing technology from the revenue they gambled on having through the early 00's.

    I shouldn't have brought it up, talking about what Intel did to AMD is depressing.

    But that's why I don't have pity for Qualcomm, as they have essentially been doing the same shit to their competitors, and even potential competitors they are strongarming out of the industry. This anti-competitive behavior destroys innovation.
  • webdoctors - Tuesday, January 17, 2017 - link

    Should be interesting to see what evidence the FTC publishes. These are pretty specific accusations, they must have obtained contracts signed by the relevant parties and some damning emails to reach this point.
  • Shadowmaster625 - Tuesday, January 17, 2017 - link

    Yet another company is punished for being too damn good.

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