Antitrust Lawsuit Filed Against Cell phone Chip Supplier
On January 17th, the Federal Trade Commission (FTC) filed an antitrust lawsuit against Qualcomm (QCOM), the lead supplier of chips used by our mobile phones. The company has been accused of conducting a monopoly in the market via their patent-licensing terms with phone partners.; specifically, of strong-arming Apple into using its product in iPhones by lowering the associated patent-licensing fees.
The impact of this particular situation goes beyond antitrust concerns and, according to the FTC, also into the stifling of innovative new products entering the market: Allegedly, QCOM prevented Apple from launching a product called the WiMax iPhone because it would have generated much lower royalties for QCOM. As a result, QCOM allegedly made a deal, allowing Apple to pay lower royalties in order for QCOM to secure a long-term hold over the iPhone and lock rivals out of the market.
Antitrust laws are designed to regulate the conduct of U.S. business corporations in an effort to promote fair competition for the sake of consumers. The main laws which enable action to be taken against corporations unfairly limiting competition are the Federal Trade Commission Act, the Sherman Act, and the Clayton Act. One of the main purposes of these laws is to prohibit the creation of a monopoly.
Detrimental Effects on Other Companies
As a result of this deal, QCOM remained Apple’s exclusive supplier, causing other companies such as Broadcom and Texas Instruments to retreat from the market. One company in particular also suffered from the failure of WiMax to enter the market—Sprint, which had invested in the standard and, instead, had to invest in LTE networks, which QCOM helped keep in place.
The Future of the Case
The emergency of iPhone 7 required Apple to split production between both QCOM and Intel due to the type of modems used for the device, thus QCOM (in response to the lawsuit) may argue that some competitive conditions have already been restored to the market in this particular case. In addition, the strength of the lawsuit may hinge on who sits on the FTC in the future, as the agency could be Republican-led in a short amount of time.
QCOM already faces significant fines from China, South Korea, Europe, and Taiwan, all of which have fined the company billions (combined) in overseas fines, forcing it to lower its licensing fees and currently investigating the company for anticompetitive practices.
This could also have an impact on the Smartphone market itself, as QCOM’s 3G/4G licensing fees can add up to five percent of the device’s entire wholesale price, potentially placing pressure on the company’s earnings and affecting investors as well.
Commercial Litigators Serving Florida
If you have been the victim in an antitrust legal dispute, or other areas of commercial litigation (such as banking, business, cybercrime, franchise law, etc.), contact Lavalle Brown & Ronan today. Our attorneys are well-versed in this complex area of the law, serving clients in Boca Raton and surrounding areas for more than 130 years combined. Let our experienced attorneys provide you with a free consultation today.