Qualcomm shares slide after US antitrust ruling

Rob Lever, Agence France-Presse

Posted at May 22 2019 10:13 PM

WASHINGTON - Smartphone chip giant Qualcomm suffered a fresh blow in its antitrust battle with a US federal judge's ruling that it "strangled competition" for years at the expense of consumers and device makers.

Shares in Qualcomm sank some eight percent in opening trading Wednesday after the ruling that the company violated antitrust law, in a case with major implications for the smartphone market.

Judge Lucy H. Koh of the northern district of California ordered Qualcomm to change its pricing and sales practices, after finding it "engaged in anticompetitive conduct" towards customers like Sony, Samsung and China's Huawei.

"Qualcomm's licensing practices have strangled competition" in the chip market for years, "and harmed rivals," she said in the ruling Tuesday in the lawsuit brought by the US Federal Trade Commission.

She added that Qualcomm's abusive tactics have been continuing and that it "is likely to replicate its market dominance during the transition to 5G, the next generation of modem chips."

The California-based company's shares had soared after reaching a settlement with Apple last month over royalty payments for chips used in smartphones, which was expected to generate a windfall of $4.5 billion.

But the 230-page ruling showed the company violated the law by using "unfair methods of competition."

The company said it will seek an expedited appeal of the ruling.

"We strongly disagree with the judge's conclusions, her interpretation of the facts and her application of the law," Don Rosenberg, Qualcomm executive vice president and general counsel, said in a statement.

Koh cited statements from company executives that showed the "unlawful practices are 'ongoing' or likely to recur" since they were part of the firm's strategy and it maintains a dominant position in the market.

The judge ruled that Qualcomm must negotiate terms for its patents on fair and reasonable terms without using threats or discriminatory tactics.

"Qualcomm must not condition the supply of modem chips on a customer's patent license status and Qualcomm must negotiate or renegotiate license terms with customers in good faith under conditions free from the threat of lack of access," the judge wrote.

John Bergmayer of the consumer group Public Knowledge said of the decision: "We congratulate the FTC on this important victory. Judge Koh's ruling shows that the FTC has the ability to bring, and win, important cases that protect American consumers."

The ruling marked the latest setback for Qualcomm which has faced antitrust litigation in Europe, South Korea and China.

Qualcomm's woes appeared to ease earlier this month when it agreed with Apple to settle all worldwide litigation in what had been a sprawling battle over royalty payments.