The U.S. Federal Trade Commission filed a complaint against Qualcomm Tuesday, alleging the San Diego-based maker of processors for mobile devices is engaged in business practices designed to gain a monopoly and hamper competition.
In the complaint filed in U.S. District Court in the Northern District of California, the FTC contends that Qualcomm uses its dominant position as a supplier of certain baseband processors to impose "onerous and anticompetitive supply and licensing terms" on cell phone manufacturers, and to weaken competitors.
According to the FTC, Qualcomm's business practices include a "no license, no chips" policy that results in higher royalty payments and an "anticompetitive tax" on the use of rival processors; a refusal to license patents to competitors that meet industry standards; and an exclusivity agreement with Apple in exchange for reduced patent royalties.
The exclusivity deal kept Apple from obtaining processors from Qualcomm's competitors from 2011 to last year, according to the FTC.
The decision to file a complaint was approved by a 2-1 vote of FTC commissioners.
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Don Rosenberg, Qualcomm's executive vice president and general counsel, said the complaint was rushed ahead of the change of presidential administrations.
"In our recent discussions with the FTC, it became apparent that it still lacked basic information about the industry and was instead relying on inaccurate information and presumptions," Rosenberg said.
"In fact, Qualcomm was still receiving requests for information from the agency that would be necessary to an informed view of the facts when it became apparent that the FTC was driving to file a complaint before the transition to the new administration," he said. "We have grave concerns about the two commissioners' decision to bring this case despite a lack of evidence supporting the allegations and theories in the complaint."
A Qualcomm statement said its practices actually have "enabled the growth and advancement of mobile communications worldwide." The allegations are "based on a flawed legal theory, a lack of economic support and significant misconceptions about the mobile technology industry," the statement said.
Commissioner Maureen Ohlhausen issued a public dissent that said the complaint does not allege that Qualcomm charges more than a reasonable royalty. She also said the existence of the case will "undermine U.S. intellectual property rights in Asia and worldwide."
The FTC said it is seeking a court order to undo and prevent Qualcomm's alleged unfair methods of competition and force it to take actions to restore competitive conditions.
