U.S. Chipmaker Faces Record Antitrust Fine from South Korea

The Korea Fair Trade Commission, a corporate regulator based in South Korea, declared that it would fine mobile chipmaker Qualcomm Inc. a hefty $853 million over the company’s purported abuse of antitrust laws. The announcement comes at the end of the Commission's three-year investigation of Qualcomm and constitutes the highest such fine charged to an individual United States-based company. The Commission concluded that Qualcomm broke antitrust laws by refusing patent access to competing chipmakers and by withholding necessary phone chips in order to pressure mobile manufacturers into strict licensing agreements. In addition, the Commission claimed that Qualcomm used patents from other chipmakers without fair compensation. Qualcomm has stated they will appeal this decision to the Seoul High Court, professing that their licensing practices follow decades-old industry standards. 

Qualcomm produces essential chips and parts for eminent mobile phone manufacturers the world over. As such, this is not the only time they have had to grapple with antitrust accusations;  in 2015, the company reached a settlement on an antitrust lawsuit from Chinese regulators that equated to a $975 million fine. Due to the decision, Qualcomm was forced to accept a lowered rate on phones sold in China that operated on their chips. If the resolution in South Korea stands, Qualcomm would likely have to settle for the same lessened charges on phones sold in the country. This could be especially problematic for business, considering that South Korea is home to both LG Electronics Inc. and Samsung Electronics Co., the latter being the world's largest phone manufacturer. As their second-largest customer, Samsung accounts for 11 percent of Qualcomm's business. Thus, Qualcomm stands to lose significant amount of revenue. The company is also facing investigations at home and from the European Union over alleged violations of antitrust policy. If Qualcomm loses the appeal to South Korea, it will likely be easier for other nations to leverage complaints and lawsuits against the company. With the precedent set by the China settlement, the chipmaker could see even further losses on revenue from phones sold worldwide.

The ruling by the Korea Fair Trade Commission could lead to potential damage for Qualcomm's long-term business model. The decision will boil down to whether Qualcomm's practices are standard industry conventions or harmful coercive tactics.