Samsung, Intel Back U.S. Regulator's Suit Against Qualcomm

By Ted Greenwald Features Dow Jones Newswires

Samsung Electronics Co. and Intel Corp. on Friday filed briefs supporting a U.S. regulator's lawsuit against Qualcomm Inc. that argues the chip company used its dominant position in cellphone chips to force customers to accept unfair terms.

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The amicus briefs by Intel, a major Qualcomm rival, and Samsung, which is both a customer and a competitor, backed a lawsuit filed in January by the Federal Trade Commission. The briefs came the same day the FTC filed its rebuttal to an earlier motion by Qualcomm requesting the case be dismissed.

Qualcomm is the dominant supplier of chips for mobile phones and a holder patents on technologies essential to cellular communications. Its patent-licensing business long has been very lucrative, accounting for most of Qualcomm's pretax profit, but is now facing a backlash from companies and regulators around the world.

South Korea's Fair Trade Commission in December fined Qualcomm about $853 million for alleged competition violations. Qualcomm has said it would contest that decision. Apple sued Qualcomm the following month and has stopped reimbursing its contract manufacturers for royalties owed to Qualcomm on the iPhones they produce, prompting Qualcomm to cut its projections for revenue and profit. Qualcomm has accused Apple of interfering with its agreements with the contract manufactures, among other allegations.

Qualcomm, in its April motion to dismiss the FTC's case, said the agency's "complaint does not contain any factual allegations of anticompetitive harm to Qualcomm's rivals in the supply of modem chips."

The FTC's response Friday restated its claims that Qualcomm is a monopolist that charges unfair royalty rates by making sales of chips conditional on the purchase of a patent license. It also repeated its allegation that Qualcomm forced Apple into an exclusive relationship, interfering with the competitive market. These practices harmed competitors by diminishing their ability and incentive to participate in the market, the FTC filing said.

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Qualcomm said Friday that the FTC's response failed to address the weaknesses it had previously highlighted in the government's case. Qualcomm declined to comment on the briefs from Samsung and Intel.

Samsung uses Qualcomm chips and technology in its smartphones, and is Qualcomm's contract manufacturer for some of its chips. But Samsung also makes chips that compete with Qualcomm's. In its brief, the South Korean company said it is in a unique position to advise the court. "Samsung has directly experienced, and been directly harmed by, the exclusionary conduct alleged in the FTC's Complaint," the filing said.

Intel dominates the market for computer chips and has been trying to gain share from Qualcomm in the smartphone market. Intel's filing supporting the FTC accused Qualcomm of behavior that "has inflicted and continues to inflict precisely the harms that the antitrust laws seek to protect against."

Qualcomm's motion to dismiss the FTC suit is scheduled to be heard starting in June in federal court in the Northern District of California.

Write to Ted Greenwald at Ted.Greenwald@wsj.com

(END) Dow Jones Newswires

May 12, 2017 21:29 ET (01:29 GMT)