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South Korea's antitrust battle ends with record 1 trillion won fine for Qualcomm

Update time : 2023-04-17 10:03:15

South Korea's Supreme Court on Thursday rejected an appeal by US chip giant Qualcomm Inc and its two subsidiaries, upholding a record fine of 1.03 trillion won imposed by the country's antitrust regulator. The fine was imposed because Qualcomm abused its dominant position in the smartphone market to engage in unfair business practices against handset makers.

The Supreme Court of Korea said, "Under the Fair Trade Act, we reconfirmed and clarified the criteria for determining whether the dominant position was abused, i.e. whether it unreasonably caused hardship to other businesses in their operations, such as imposing unreasonable terms and conditions, or exerting adverse influence."
The Korea Fair Trade Commission (KFTC) legally dealt with Qualcomm's monopolistic conduct of excluding and restricting competition by abusing its dominant market position in 2016, imposing a fine of KRW 1.0311 trillion and ordering it to make corrections. The Commission found that Qualcomm held standard essential patents (SEPs) for mobile communications necessary for the production of mobile phones, tied the supply of modem chipsets to patent rights, and stipulated that the "Qualcomm Core" could not be used without paying royalties, effectively restricting the use of patent rights. Qualcomm also charges handset manufacturers for patent licenses, and even "bundles" chips and patent licenses, forcing unnecessary patent rights contracts or a percentage of the handset's selling price.
The Korea Fair Trade Commission welcomed the Supreme Court's decision to uphold the $1 billion fine and corrective order against Qualcomm, saying in a statement on Thursday: "While the licensing agreement itself was not found to be unlawful, it clearly establishes an anti-competitive business structure in the market for standard-essential patents and modem chips in order to maintain and expand its monopoly position, and by causing restrictions on competition in the relevant markets. and monopolising the market structure by creating a competitive restrictive effect in the relevant markets is unlawful, which is relevant."
The KFTC said that in light of the ruling, it plans to scrutinise the implementation of the corrective order and respond sternly to unfairly restrictive competition practices.
According to IT House, it took nearly nine years since the Korea Fair Trade Commission began investigating Qualcomm's practices in 2014 before finally concluding the case. The commission began investigating whether Qualcomm had violated South Korea's competition laws by refusing to license chipmakers and charging higher fees to smartphone makers who used its patents after receiving complaints from industry participants.
Qualcomm has been charging handset makers, including Samsung Electronics, MediaTek and Intel, 5 per cent of the price of a handset as a royalty on CDMA technology for buying its modem chips.
The regulator also issued a corrective order requiring Qualcomm not to enter into terms with customers that were unfavourable to them.
In February 2017, Qualcomm called the Korea Fair Trade Commission's ruling "unprecedented and untenable" and appealed the case to the Seoul High Court. But the court affirmed some of the corrective measures proposed by the antitrust regulator, including requiring Qualcomm to stop discriminating against competitors who seek to use its essential mobile patents and develop competing modem chips for use by smartphone makers.
This is the first time since its inception in 1981 that a Korean regulator has imposed a fine of more than 1 trillion won in a single case. 2009 also saw the Korea Fair Trade Commission fine Qualcomm 27.23 billion won for abusing its dominant market position in Korea.

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