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Qualcomm is facing U.S. antitrust charges for stifling phone chip innovation

The Federal Trade Commission says it illegally tied chip sales to patent licensing.

Qualcomm Inc. CEO Steve Mollenkopf holds up the tiny Qualcomm Snapdragon 835 mobile processor during a keynote address at CES 2017 at The Venetian Las Vegas on January 6, 2017 in Las Vegas, Nevada. 
Qualcomm CEO Steve Mollenkopf
Ethan Miller / Getty Images

Chip giant Qualcomm is facing fresh antitrust charges, this time in the U.S., over how it licenses its technology to phone makers.

With less than a week left in the Obama administration, the Federal Trade Commission charged Qualcomm with, among other things, refusing to license patents to rivals and illegally forcing phone makers that wanted its semiconductor chips to take a license to its technology.

“Qualcomm’s conduct has harmed competition and the competitive process,” the FTC said in the lawsuit, filed Tuesday in the Northern District of California. “At a time when cellular technologies are expanding to new and varied applications, Qualcomm’s practices threaten further consumer harm in an industry in which competition and innovation are vitally important.”

The agency also accused Qualcomm of forcing Apple, in exchange for lower licensing fees, to agree to exclusively using Qualcomm’s modem chips from 2011 to 2016. (Apple used Qualcomm’s chips exclusively up until the iPhone 7, at which point Apple split the business between Intel and Qualcomm.)

“Qualcomm’s exclusive supply arrangement with Apple denied other baseband processor suppliers the benefits of working with a particularly important cellphone manufacturer and hampered their development into effective competitors,” the FTC said in its suit.

It remains to be seen how aggressively the Trump administration will pursue the case, though. With the new president, Republicans, rather than Democrats, will have the majority of the FTC, and its new chairman will be a Republican.

The Commission’s vote on the Qualcomm complaint was already a split one, with the lone Republican, Maureen Ohlhausen, voting against the suit and issuing a rare dissenting opinion. (PDF)

Qualcomm, for its part, criticized both the timing and substance of the FTC complaint.

“The portrayal of facts offered by the FTC as the basis for the agency’s case is significantly flawed,” the company said in a statement to Recode. “In particular, Qualcomm has never withheld or threatened to withhold chip supply in order to obtain agreement to unfair or unreasonable licensing terms. The FTC’s allegation to the contrary — the central thesis of the complaint — is wrong.”

Qualcomm has faced antitrust charges in other regions, including China, where the company was forced to change its licensing terms.

Here is a copy of the lawsuit:

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