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Subject : Qualcomm fined $208m for unfair practices   
Date 2009-07-29 Visit 3256

Korea`s Fair Trade Commission said yesterday it has decided to fine U.S.-based mobile chipmaker Qualcomm Inc. 260 billion won ($208.2 million) for "abusing its monopoly market status." It is the largest fine ever imposed on a single company in the country.

The FTC said that Qualcomm, which owns key patents for the code division multiple access and posesses 99.4 percent share of the local CDMA modem chip market, demanded higher royalties from local mobile manufactures using other companies` products.

The company demanded 5.75 percent royalties from companies that use other chipmakers` modem chips and 5 percent royalties from those who use its own chips.

The antitrust watchdog said the world`s largest cell phone chipmaker also offered rebates to Korean mobile phone makers such as Samsung Electronics and LG Electronics on the condition that they purchase a majority of their chips from Qualcomm.

For example, the FTC said, Qualcomm offered 3 percent of the value purchased to a phone maker if the maker buys more than 85 percent of the modem chips from Qualcomm.

In addition, Qualcomm`s "unfairly" demanded continued payment of 50 percent of old royalties even after the patent rights expired, putting heavier cost burdens on local manufacturers, the FTC said.

"Due to the Qualcomm`s unfair business practices, its rivals such as Korea`s Eonex Technologies and Taiwan`s VIA weren`t able to enter the local CDMA chip market," said Suh Dong-won, vice chief of the FTC in a press briefing in Seoul.

"With the FTC`s decision, we expect that local manufacturers will be able to lower the cost burden which could benefit cell phone consumers as well," he said.

According to FTC rules, the watchdog can levy a fine on a company found abusing market monopoly status up to 3 percent of its sales.

This time, the FTC applied a 2.2 percent rate, he said. According to the FTC, Qualcomm`s 2007 sales in the Korean market stood at $3.87 billion, or 35 percent of its total global sales

In 2005, the FTC levied a 113 billion won fine on local fixed-line telecom giant KT Corp.

The FTC started investigation on Qualcomm in 2006 when two U.S. companies - Texas Instruments Inc. and Broadcom Corp. - and two small Korean companies - Nextreaming Corp. and Thin Multimedia Inc. - filed complaints.

Qualcomm Korea president Cha Young-koo said the company cannot agree with the FTC`s ruling and will take legal steps.

"The size of the fine, in particular, is quite shocking. We will defend our position as much as we can, through all appropriate legal steps available," Cha told reporters in a news conference he called shortly after the FTC`s announcement.

Cha claimed that the FTC`s ruling serves for foreign competitors of Korean mobile phone manufacturers and hurt Korean firms` price competitiveness because the "discriminative royalties" and "conditional rebates" that FTC claims are actually "royalty discounts" and "incentives" for Korean firms buying Qualcomm products massively.

"Incentives based on chip purchase volume has contributed to enhancing the price competitiveness of Korean handsets. They were widely used marketing method employed under agreements with Korean handset manufacturers," Cha said.

"Companies like Texas Instruments Inc. and Broadcom Corp. are main suppliers for GSM-using mobile phone makers such as Nokia and Ericsson. They are attacking Korean mobile phone makers and Qualcomm to thwart the spread of WCDMA in the global market," he said.



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