South Korea’s antitrust supervisory body has made a fine of a record 1.03 trillion won or $853 million on San Diego-based chipmaker QUALCOMM, Inc.(NASDAQ:QCOM) for violating antitrust laws, the latest in a run of government movements that threaten the U.S. chipmaker’s money-making business.
According to reports The South Korean Fair Trade Commission revealed that the firm licensed its significant patents only to mobile-phone manufacturers and didn’t properly discuss the terms of its licenses. The agency also announced Qualcomm forced its customers into signing patent license contracts when selling its chips used in cell phones in the country, and it didn’t fairly pay for the use of copyrights held by other phone makers.
The pronouncement from the South Korean authorities adds to investor vows that the company, which is also the subject of inquiries in the U.S. and Europe, may find it hard to defend its money-spinning licensing business. Qualcomm gets the majority of profit, from selling the right to use technology that’s essential to all modern phone systems.
However Qualcomm, has called the verdict “unprecedented and insupportable.” The chipmaker said that it will appeal the decision in Seoul’s High Court. The Korean Fair Trade Commission (KFTC) decision doesn’t go into effect instantly and Qualcomm will look for a stay from the courts while it appeals, said Don Rosenberg, the company’s general counsel.
“The KFTC ruling will not just benefit local handset makers but other global chipset makers too, so today’s ruling from the commission seems a bit broader and stronger than that of the China’s last year,” said Jung Dong-joon, a patent lawyer at SU Intellectual Property. “Qualcomm sales accounts for about 20 percent in the Korean market and that’s a significant market for Qualcomm.”
For the likes of the world’s largest phone maker Samsung, and LG Electronics Inc., the decision opens up the likelihood that they may be able to pay lower rates to QUALCOMM, Inc. (NASDAQ:QCOM).