Qualcomm loses FTC case, and Broadcom is under expanded investigation

Qualcomm’s delight about its victory over Apple was shortlived – it has lost its dispute with the US Federal Trade Commission (FTC) over antitrust allegations. Since these were initially sparked by Apple, some experts expected the case to go away after the two firms’ settlement, but that was not to be. Instead, the FTC has won its case, with Judge Lucy Koh – of the District Court for the Northern District of California – ruling that the chip giant did violate the law by abusing its dominant position.

The company’s share price fell by 12% on the ruling, even as the FTC also initiated an investigation into its rival, and former would-be acquirer, Broadcom.

“Qualcomm’s licensing practices have strangled competition in the CDMA and the premium LTE modem chip markets for years, and harmed rivals, OEMs, and end consumers in the process,” Judge Koh said in her ruling. This could force Qualcomm to revise licensing agreements in many markets – it may have to license more of its standards-essential patents to rivals, and drop any commitment for licensees to buy its chips.

“We strongly disagree with the judge’s conclusions, her interpretation of the facts and her application of the law,” said Don Rosenberg, Qualcomm’s general counsel.

In a filing made in 2017, after Apple had brought multiple cases against its modem supplier, the FTC argued Qualcomm was using its dominant position in mobile chips to restrict competition, and that it was not complying with Frand (fair, reasonable and non-discriminatory) terms which govern patents that are essential to implement standards.

The FTC also claimed it was unreasonable for Qualcomm to enter into an exclusive agreement for some components with Apple, to the disadvantage of other smartphone makers. Details of those exclusive deals, and other aspects of Qualcomm’s usually shadowy contract terms, emerged during hearings connected to the Apple suits and countersuits.

Meanwhile, the FTC is broadening its antitrust probe of Broadcom, to see whether it engaged in anti-competitive behavior in the WiFi and switch-chip sectors, two of its strongest markets. According to Bloomberg reports, the FTC is investigating whether the chip company forced some of its customers into exclusive deals, according to a civil investigative demand (similar to a subpoena) filed last week.

Early last year, Broadcom acknowledged that it was under investigation by the FTC, but said that the  investigation was “immaterial”.

Broadcom is also under investigation by the European Union, which is looking at the firm’s set-top box chip business.