The US Federal Trade Commission has filed a lawsuit against Qualcomm over anti-competitive practices in the chip markets, with a key example of the Apple deal.
The chip maker is accused of forcing Apple into an exclusive deal with its licensing deals – thereby preventing the rival chip makers from rising up. Shares of Qualcomm fell sharply after this news, as FTC wants the US government to intervene in Qualcomm’s business for good.
Qualcomm’s Illegal Market Practises
When it comes to mobile chips – most people know the brand Snapdragon as the only best choice. Well, the maker of this – Qualcomm, has put in years of hard work to improve it and place it as the best offering in the mobile segment. Well, the company seems to be exploiting its dominant position in the market, as alleged by FTC.
In a lawsuit filed against Qualcomm, the FTC alleged the chip maker of forcing OEMs into entering exclusive deals – so as to prevent the rival chip makers from growing up. FTC stated an example of Apple: where the Cupertino-based company is forced into an exclusive deal – of using only Qualcomm chips in its devices – in exchange for lower licensing fees.
“Qualcomm recognized that any competitor that won Apple’s business would become stronger, and used exclusivity to prevent Apple from working with and improving the effectiveness of Qualcomm’s competitors.”
FTC also stated a couple of examples of how global markets have punished Qualcomm for its anti-competitive practices. The chip maker was earlier fined $1 billion by China as a result of a long-running antimonopoly investigation against the company. South Korea too, has been fined $850 million for Qualcomm for maintaining an “unfair business model” and creating a monopoly with its practices.
All these accusations led the Qualcomm investors to divest their funds – as the company’s shares fell 4% to $64.19 on Monday following the lawsuit news. Well, Qualcomm responded by calling FTC’s allegations based on “flawed legal theory,” and it “has never withheld or threatened to withhold chip supply in order to obtain agreement to unfair or unreasonable licensing terms”.