Why FTC-Qualcomm Lawsuit Verdict Can Change The Smartphone World

The Federal Trade Commission or FTC and Qualcomm Tuesday offered their closing arguments over a two-year old case that can change the course of the global smartphone industry in coming times. The FTC has accused Qualcomm of operating in a monopolistic way, charges excessive fees for its patent licenses and force customers like Apple to work exclusively with it.

Both the parties have closed their arguments over the case and verdict is awaited from Justice Lucy Koh.

Koh said, though she is ‘fairly fast’ in pronouncing her verdicts, in this case, it may take little longer as another government shutdown is expected in February.

The FTC attorney Jennifer Milici, in her arguments, said Qualcomm is the largest provider of mobile chips and has a huge clout over the 3G and 4G handset market. She said the San Diego headquartered firm is abusing its power to create a monopoly in that segment and forcing customers like Apple to use exclusively its solutions.

“If that is not stopped, she said, Qualcomm will do the same in the 5G market.”

Qualcomm, however, refuted all allegations and was not ready to buy the FTC’s arguments.

“The FTC hasn’t come close to meeting its burden of proof in this case. All real-world evidence presented at trial showed how Qualcomm’s years of R&D and innovation fostered competition, and growth for the entire mobile economy to the benefit of consumers around the world,” said Don Rosenberg, executive vice president and general counsel of Qualcomm. “Our licensing rates – which were set long before we had a chip business, and revalidated time and again – fairly and accurately reflect the value of our patent portfolio. Qualcomm’s technology has been the foundation of a thriving, competitive industry.”

FTC Vs Qualcomm : What Is The Case

In January 2017, FTC filed a complaint in federal district court accusing Qualcomm of using anticompetitive tactics to maintain its monopoly in the smartphone semiconductor market.

Qualcomm owns patents for multiple, in fact, most crucial mobile connectivity technologies, in the 3G, 4G and 5G. Mobile phones require these technologies to connect to a telecom network, and Qualcomm charges a license fee from handset companies to use these technologies. Besides, Qualcomm also provides chips for mobile phone modems.

As per a Qualcomm’s policy, ‘No license no chips’, a mobile phone maker has to pay a license fee even if it does not use Qualcomm’s chips.

Apple did not buy this argument but eventually had to succumb to Qualcomm’s pressure and bought its licenses. The company was even using Qualcomm’s chips for its iPhones till 2013. After a fallout with Qualcomm, Apple is no more using its chips and switched to Intel for its requirements.

What If FTC Wins The Case

The ongoing lawsuit, if goes in favour of FTC, will have widespread ramifications. The smartphone prices, including that of iPhones, would go down drastically as the Qualcomm license fees, as per the complainants, are excessive.

For the record, Qualcomm does not charge its customers, say Apple, only for its solutions used in the smartphone, rather it charges license fee as a percentage of the whole device. Means, its license fee, for the same technology, varies from smartphone to smartphone. The companies who supported FTC in this case include Apple, Samsung, Ericsson, Sony, Lenovo and many others. Consumers can expect a sharp fall in smartphone prices if FTC wins the case.

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