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QCOM: FTC Alleges Special Deal with Apple
By Tiernan Ray

Confirming a report this afternoon by Bloomberg reporters, the Federal Trade Commission announced just after market close that it has filed a complaint against the company, alleging, “by threatening to disrupt cell phone manufacturers’ supply of baseband processors, Qualcomm obtains elevated royalties and other license terms for its standard-essential patents that manufacturers would otherwise reject.”

The complaint is filed with the U.S. District Court for the Northern District of California.

Qualcomm is the largest supplier of so-called baseband modem chips to Apple (AAPL), Samsung Electronics (005930KS), and other smartphone makers.

The FTC complaint says the company has used “anticompetitive” measures to maintain a “monopoly” in baseband chips. The complain alleges Qualcomm has “excluded” competitors from getting some baseband business, thereby harming consumer choice. Intel (INTC) is the most prominent current competitor to Qualcomm, but there are others such as MediaTek (2454TW).

Among the charges is a special deal to give Apple a break on costs:

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.

Note that the vote was 2-to-1 in favor of bringing the complaint, and FTC Commissioner Maureen Ohlhausen voted “No,” and explains her dissent in a linked statement.

Ohlhausen writes that the complaint is “based on a flawed legal theory … that lacks economic and evidentiary support … that will undermine U.S. intellectual property rights in Asia and worldwide.”

I’ve reached out to Qualcomm and there’s no response yet from the company.

http://blogs.barrons.com/techtraderdaily/2017/01/17/qualcomm-ftc-alleges-special-deal-with-apple/