Qualcomm, the world’s largest maker of smartphone modems and microchips, illegally charges companies sky-high prices to license its technology, a federal judge ruled Tuesday.
In a case brought to court in 2017 by the US Federal Trade Commission, District Court Judge Lucy Koh said Qualcomm should not receive a percentage of sales of each phone a company sells; instead, it should receive a much smaller amount based on what Qualcomm technology exists inside the phone. It also must license its patents to rival chipmakers.
Qualcomm is expected to appeal the decision. If it is upheld, that could upend the way Qualcomm does business. The tech company, based in San Diego, California, receives several dollars for each phone its technology is in, based on the total price of the phone. Judge Koh ruled that violates US antitrust law.
“Qualcomm’s licensing practices have strangled competition… for years, and harmed rivals, [equipment manufacturers] and end consumers in the process,” she wrote in the findings of fact. She found that its business practices are an “unreasonable restraint of trade” under the nation’s antitrust law.
Qualcomm said it intends to file an expedited appeal of the decision. It will also seek a stay to stop it from taking effect.
“We strongly disagree with the judge’s conclusions, her interpretation of the facts and her application of the law,” said Don Rosenberg, the company’s general counsel, in a statement.
The ruling comes five weeks after Qualcomm reached a settlement in a similar but separate antitrust case brought by Apple. That agreement included an unspecified payment from Apple to Qualcomm, and the two companies announced a six-year license contract under which Apple will continue to buy Qualcomm chips. The deal was reached on the eve of that case going to trial.
Qualcomm’s stock had soared 35% following the agreement. But Qualcomm’s stock tumbled 10% in premarket trading Wednesday.
Although the case specifically applies to Qualcomm and its business practices, critics question the power of the world’s tech giants. Many have called for them to be reined in or even broken up.
The Supreme Court ruled earlier this month that a group of iPhone owners could sue Apple in an antitrust case charging that its App Store is a monopoly. The European Union recently hit Google with a $1.7 billion fine for violating antitrust rules. Critics have accused Facebook and Amazon of having monopoly power.