Risk & Compliance

Judge Rules Qualcomm Broke Antitrust Laws

The company improperly used its leverage to boost fees to phone makers.
Judge Rules Qualcomm Broke Antitrust Laws

A judge in the Northern District of California ruled in favor of the U.S. Federal Trade Commission against Qualcomm that the company violated antitrust laws, stifled competition, and charged improper fees to phone makers.

“Qualcomm’s licensing practices have strangled competition … for years, and harmed rivals, [equipment manufacturers], and end consumers in the process,” U.S. District Court Judge Lucy Koh said in her ruling. Judge Koh said Qualcomm’s practices represented an “unreasonable restraint of trade” and it should not have as much leverage in the royalties it charges, which were based on the entire cost of the phone rather than the $15 to $20 cost of the Qualcomm chips.

“In some cases, Qualcomm has even cut off OEMs’ chip supply, although the threat of cutting off chip supply has been more than sufficient to coerce OEMs into signing Qualcomm’s patent license agreements and avoiding the devastating loss of chip supply,” Koh’s decision said.

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Qualcomm shares fell more than 12% following the ruling, erasing more than $11 billion from its market cap.

In a statement, the company said it would immediately seek a stay of the judgment and an expedited appeal to the U.S. Court of Appeals for the 9th Circuit.

“We strongly disagree with the judge’s conclusions, her interpretation of the facts, and her application of the law,” said Don Rosenberg, executive vice president and general counsel.

The ruling comes about a month after Qualcomm and Apple announced they had agreed to drop a legal dispute over Qualcomm’s charging practices for licensing. Qualcomm had said that agreement would add $2 per share in incremental earnings.

The ruling requires the company to renegotiate its existing licensing agreements in good faith. It can no longer enter into exclusivity agreements with phone makers and must license its patents to rivals.

Qualcomm is the world’s largest maker of smartphone chips and modems.