Samsung, Intel Back U.S. Regulator's Suit Against Qualcomm
May 12 2017 - 8:44PM
Dow Jones News
By Ted Greenwald
Samsung Electronics Co. and Intel Corp. on Friday filed briefs
supporting a U.S. regulator's lawsuit against Qualcomm Inc. that
argues the chip company used its dominant position in cellphone
chips to force customers to accept unfair terms.
The amicus briefs by Intel, a major Qualcomm rival, and Samsung,
which is both a customer and a competitor, backed a lawsuit filed
in January by the Federal Trade Commission. The briefs came the
same day the FTC filed its rebuttal to an earlier motion by
Qualcomm requesting the case be dismissed.
Qualcomm is the dominant supplier of chips for mobile phones and
a holder patents on technologies essential to cellular
communications. Its patent-licensing business long has been very
lucrative, accounting for most of Qualcomm's pretax profit, but is
now facing a backlash from companies and regulators around the
world.
South Korea's Fair Trade Commission in December fined Qualcomm
about $853 million for alleged competition violations. Qualcomm has
said it would contest that decision. Apple sued Qualcomm the
following month and has stopped reimbursing its contract
manufacturers for royalties owed to Qualcomm on the iPhones they
produce, prompting Qualcomm to cut its projections for revenue and
profit. Qualcomm has accused Apple of interfering with its
agreements with the contract manufactures, among other
allegations.
Qualcomm, in its April motion to dismiss the FTC's case, said
the agency's "complaint does not contain any factual allegations of
anticompetitive harm to Qualcomm's rivals in the supply of modem
chips."
The FTC's response Friday restated its claims that Qualcomm is a
monopolist that charges unfair royalty rates by making sales of
chips conditional on the purchase of a patent license. It also
repeated its allegation that Qualcomm forced Apple into an
exclusive relationship, interfering with the competitive market.
These practices harmed competitors by diminishing their ability and
incentive to participate in the market, the FTC filing said.
Qualcomm said Friday that the FTC's response failed to address
the weaknesses it had previously highlighted in the government's
case. Qualcomm declined to comment on the briefs from Samsung and
Intel.
Samsung uses Qualcomm chips and technology in its smartphones,
and is Qualcomm's contract manufacturer for some of its chips. But
Samsung also makes chips that compete with Qualcomm's. In its
brief, the South Korean company said it is in a unique position to
advise the court. "Samsung has directly experienced, and been
directly harmed by, the exclusionary conduct alleged in the FTC's
Complaint," the filing said.
Intel dominates the market for computer chips and has been
trying to gain share from Qualcomm in the smartphone market.
Intel's filing supporting the FTC accused Qualcomm of behavior that
"has inflicted and continues to inflict precisely the harms that
the antitrust laws seek to protect against."
Qualcomm's motion to dismiss the FTC suit is scheduled to be
heard starting in June in federal court in the Northern District of
California.
Write to Ted Greenwald at Ted.Greenwald@wsj.com
(END) Dow Jones Newswires
May 12, 2017 21:29 ET (01:29 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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