US Regulator Demands New Hearing On Qualcomm Decision

The US Federal Trade Commission has filed a petition with a US appeals court to reconsider an 11 August ruling that struck down an antitrust case against mobile chipmaker Qualcomm.

The move has the potential to reopen antitrust questions around Qualcomm’s business practices that have plagued the company for years.

The regulator asked the US Ninth Circuit Court of Appeals in San Francisco for a hearing before an 11-judge panel, after a three-judge panel at the appeals court last month reversed a lower court’s decision against Qualcomm.

The court also vacated an injunction that would have required Qualcomm to change its intellectual property licensing practices, threatening its business model.

Patent licences

The FTC argued on Friday that the appeals court was in legal error when it ruled that Qualcomm’s licensing practices do not impose an anticompetitive surcharge on its competitors.

“The panel’s decision blesses the continued stifling of competition in multi-billion-dollar markets for cellular communications chips on which much of the digital economy depends,” the FTC said.

The regulator had won its case against Qualcomm at the trial level, arguing that the company’s business model of selling chips only to companies that also license its thousands of mobile phone-related patents was anticompetitive.

The bulk of Qualcomm’s profits come from its patent licences, rather than its chip sales.

‘Qualcomm tax’

Rival chipmaker Intel, along with car manufacturers including Daimler, Ford and Tesla, had warned that the court’s decision would weaken the ability of the FTC to carry out enforcement actions.

The US Justice Department, meanwhile, has argued that issues around Qualcomm’s royalty charges must be addressed in contract or patent law, rather than antitrust law.

Qualcomm says its royalty charges of up to $20 (£16) per phone are same no matter which company’s chips are actually used in the device – what critics call the “Qualcomm tax”.

However, at trial the FTC argued that Qualcomm was able to offer phone makers deals that would lower the total price if its chips were used.

Competitors are unable to offer such deals, effectively giving Qualcomm an anti-competitive price advantage, the FTC argued.

Appeal

US District Judge Lucy Koh agreed and in May 2019 ordered Qualcomm to renegotiate its licences, an order struck down on appeal before it took effect.

The appeals court said no anticompetitive harm was created, since the payment is made by the device manufacturers and not by competing chipmakers.

The FTC argued the appeals court decision was a legal error.

“The panel’s errors have cast doubt on fundamental matters of antitrust principle and will encourage monopolists to cloak anticompetitive practices beneath false invocations of patent law and the appearance of neutrality,” the regulator wrote.