Qualcomm's profits will likely take a hit next quarter unless it successfully appeals the record fine handed out by the Korean Fair Trade Commission.
Communications giant Qualcomm has been hit with a massive ₩260 billion fine – that's £126.4 million – by the Fair Trade Commission in South Korea.
As reported by Engadget
, the company – which is best known for manufacturing the radio chips used in many mobile handsets – has been handed the fine after investigators uncovered evidence that companies agreeing to do business exclusively with Qualcomm were being offered substantially better deals on licensing CDMA technology than those who like to keep their options open and deal with other companies as well. The Commission has also ordered the company to stop charging royalties on expired or obsolete patents.
The fine is the largest penalty ever handed out by the South Korean Fair Trade Commission, and could put a real dent in Qualcomm's operations over there: the company deals with Korean handset manufacturers Samsung and LG Electronics, and if it turns out that the contracts held between the companies are invalid Qualcomm could be losing more than just the fine. Even if the company carries on as normal, it's important that it placates the Commission: the fine represents a whopping 28 percent of the company's profits last quarter.
For its part, Qualcomm denies the claims and states it plans to appeal the fine. Further, Bloomberg
reports the company's general counsel Donald Rosenberg as stating that, no matter what the outcome of the appeal, the company will “make sure we remain price-competitive
” and not pass any lost revenue on to its customers.
The US-based company's legal woes are unlikely to be over any time soon, either: Qualcomm is also currently under investigation by the European Competition Commission over claims by handset manufacturer Nokia that it is charging too much to licence its patented technologies.
Is Qualcomm guilty of some sharp practice, or is it just good business sense to reward loyal customers with discounted deals? Share your thoughts over in the forums.