FTC: Qualcomm's Business Practices are Anticompetitive

The Federal Trade Commission yesterday filed a complaint against Qualcomm, charging the company with anticompetitive business practices related to its broadband chip manufacturing business. Apple is among Qualcomm’s victims, according to the complaint.

The FTC notes that Qualcomm manufactures, sells, and holds the patents for its modem chips. Those patents are essential to industry standards enabling cellular connectivity, and telecommunications industry bodies have adopted those patents as part of their standards work, the FTC explains.

As part of including Qualcomm’s patented technology in the standards, companies are typically expected to license the technology on a fair, reasonable, and non-discriminatory basis. But the FTC says that instead, Qualcomm has used its dominant position in the baseband processor space “to impose onerous and anticompetitive supply and licensing terms on cell phone manufacturers and to weaken competitors.”

Qualcomm’s alleged violations of the FTC Act are essentially due to three practices by the company, according to the Federal Trade Commission’s complaint in the U.S. District Court for the Northern District of California.

The first alleges that Qualcomm has a “no license, no chips” policy, meaning it will provide baseband processors only to those cell phone manufacturers that agree to its preferred license terms. (The FTC says cell phone manufacturers as a result have to pay Qualcomm higher royalties on products using competitors’ baseband processors.)

The second alleges that Qualcomm won’t license standard-essential patents to competitors. (The FTC says the company has consistently refused to do so.)

The third alleges that Qualcomm got Apple to enter into an exclusive contract with it in exchange for reduced patent royalties. (The FTC says that, as a result, Apple was prevented from sourcing baseband processors from Qualcomm competitors in 2011 and again last year.)

The FTC complaint asks the court to rule that Qualcomm’s conduct violates Section 5(a) of the FTC Act. It asks that Qualcomm be prevented from engaging in this conduct now and in the future. And it asks the court to grant whatever “equitable relief” the court believes will prevent such violations going forward.