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FTC slaps Qualcomm with record fine of 1 tln won for abusing market power

South Korea's antitrust watchdog on Wednesday slapped US mobile phone chipmaker Qualcomm Inc. with a record fine of 1.03 trillion won ($853.1 million) for abusing its dominant position in the mobile communications market.

The Fair Trade Commission said the San Diego-based company and its two affiliates breached the country's competition act by refusing to offer licenses to chipset manufacturers and demanding high fees for patents used by smartphone makers.

Qualcomm officials enter a courtroom of the Fair Trade Commission in Sejong, central South Korea, on Dec. 28, 2016. (Yonhap)
Qualcomm officials enter a courtroom of the Fair Trade Commission in Sejong, central South Korea, on Dec. 28, 2016. (Yonhap)

"The FTC orders Qualcomm to take corrective measures against its power abusing business and imposes 1.03 trillion won in fines," the watchdog said in a statement. "The decision is aimed at putting right Qualcomm's unfair business model."

The amount of penalty marked the highest-ever fine that the FTC has imposed, breaking the earlier record of 668.9 billion won levied on six LPG suppliers in 2010.

The watchdog said the mobile communications market consists of three sub-markets -- patent license, modem chipset and mobile phone -- and Qualcomm wields its monopolistic control in the former two markets and highly influences the third.

Qualcomm holds a majority share of standard essential patent rights in the code division multiple access and the long term evolution standards, posting $7.95 billion in license royalties in 2015.

The FTC said the company refused to offer its patent rights to chipset makers and forced them to sign an unfavorable contract that demands they report business information to Qualcomm.

It also did not provide Qualcomm-chartered chipsets to mobile phone makers when they refused to comply with Qualcomm's license policy and demanded the manufacturers share their patent rights for free.

"Qualcomm has taken a contradictory stance, as it received comprehensive licenses from handset companies but never offered its rights to its chip rivals," the FTC said. "As a result, Qualcomm's chipset became a perfect product that is safe from any patent suits, but its rivals' products had copyright flaws. The company gained a decisive edge in the market."

The watchdog launched the probe to review the US firm's practices in 2014, with many global chipmakers and handset manufactures including Intel Corp. and Samsung Electronics Co. having participated in the hearing.

The FTC's ruling came after the Chinese corporate watchdog levied a fine of 1 trillion won on Qualcomm for forcing excessive royalties in 2015. The similar investigations are under way separately in the United States, the European Union and Taiwan. (Yonhap)