Previous business/academic article Next business/academic article
Academic Articles Awards > Unilateral Conduct

A Comparative and Economic Analysis of the U.S. FTC’s Complaint and the Korea FTC’s Decision Against Qualcomm

Douglas H. Ginsburg et al., Competition Policy International, Forthcoming

See Douglas H. Ginsburg's resume See Anne Layne-Farrar's resume See Koren Wong-Ervin's resume See Ariel Slonim's resume See Scott Robins's resume

Vote for this articleHelp

* Average
** Interesting
*** Good
**** Excellent
***** Must receive an Award!

Please note that the star(s) appearing on the article page before you have voted reflect the status of all votes registered to date.

Readers’ vote will close on February 9, 2018. Readers’ vote will allow you to nominate 1 article for each of the Awards, i.e., 10 Academic articles, 10 Business articles, and the best Soft Laws. The readers’ short-list of Academic and Business Articles will be communicated to the Board together with the 20 articles nominated by the Steering Committees. The Board will decide on the award-winning articles. Results will be announced at the Awards ceremony to take place in Washington DC on the eve of the ABA Antitrust Spring Meeting on April 10, 2018.

Click here to read the full article online

On January 17, 2017, the U.S. Federal Trade Commission (FTC) filed a lawsuit against Qualcomm Incorporated based on a “monopoly broth” or course of conduct theory for alleged monopoly maintenance in certain narrowly defined baseband processor markets. The vote to file the complaint was 2-1 over the dissent of now-Acting Chairman Maureen Ohlhausen, who described it as “an enforcement action based on a flawed legal theory (including a standalone Section 5 count) that lacks economic and evidentiary support, that was brought on the eve of a new presidential administration, and that, by its mere issuance, will undermine U.S. intellectual property rights in Asia and worldwide.”

In a jurisdiction on the other side of the globe, the Korean Fair Trade Commission (KFTC) had issued an administrative decision against Qualcomm on December 28, 2016, concluding that the company employed an “unfair business model” with respect to the licensing of its 2G (CDMA), 3G (WCDMA), and 4G (LTE) standard-essential patents (SEPs) and the sale of its baseband processors, and imposed global portfolio-wide remedies and a fine of KRW 1.03 trillion (approx. US $853 million).

This article provides a legal and economic comparative analysis of the FTC’s complaint and the KFTC’s decision, highlighting the fundamental differences between the two and setting forth some of the main economic and legal problems with each. As an initial matter, it is important to bear in mind that the FTC’s complaint is not a decision, but rather a set of allegations filed in court to initiate the court’s resolution of the issues. Meanwhile, Qualcomm has stated that it will appeal the KFTC’s administrative decision, and has requested a stay from the Seoul Central District Court.

With respect to the substantive allegations, there are some similarities in the two cases but the main theories of harm differ significantly. For example, the KFTC concluded that Qualcomm possesses dominance in 2G, 3G, and 4G technologies: “As SEPs cannot be replaced by other technologies, a SEP holder gains complete monopolistic power by holding even a single SEP,” while the FTC limited its market power allegations to CDMA baseband processors and premium LTE baseband processors. Unlike the KFTC’s decision, the FTC’s complaint contains no allegation that Qualcomm engaged in unlawful tying or bundling by licensing on a portfolio bases, nor does the FTC allege that Qualcomm violated U.S. antitrust laws by allegedly requiring royalty-free cross-licenses.

To the extent that any other competition agency is relying upon the FTC’s complaint to state a theory of harm with respect to SEP licensing practices, it would be well advised to read the complaint carefully. If a foreign agency is seeking FTC endorsement of any particular theory, it would be wise to reserve judgment until at least the appointment of new FTC Commissioners and, if the agency does not then withdraw the complaint, until the court has ruled on the FTC’s ambiguous and highly controversial theories of harm.

Download our brochure