Business Essentials for Professionals


Apple Takes on Qualcomm in Courts As Regulators Waver

Apple Takes on Qualcomm in Courts As Regulators Waver
Analysts say that Apple’s perception that regulators are unlikely to put an end to what it considers the chip maker, Qualcomm's, unfair business practices is reflected by Apple's new legal assault on Qualcomm in the United States and China.
Qualcomm demands for a license fee based on the total price of the phones and Apple has been for long objected to Qualcomm's practice of charging for the "modem" chips that help phones use wireless networks data plans. The original inventor of a number of key wireless technologies is Qualcomm.
Qualcomm was sued over its practices by the U.S. Federal Trade Commission on Jan. 17. However, FTC Commissioner Maureen K. Ohlhausen was named to head the regulatory agency by U.S. President Donald Trump earlier this week. The FTCs lawsuit has been vigorously opposed by Ohlhausen.
"[W]e have a hard time seeing the case go forward with the dissenting FTC commissioner slated to become the head of the FTC," Morgan Stanley analyst James Faucette wrote in a note to investors on Wednesday. "If the FTC abandons its case, it certainly would not be helpful to Apple, but we would guess that Apple will probably still try to push the issue."
Saying the lawsuit "fails to allege that Qualcomm charges more than a reasonable royalty" and "based on a flawed legal theory ... that lacks economic and evidentiary support", Ohlhausen broke her usual practice of not commenting on her dissenting votes in the Qualcomm case.
There were no immediate comments available from FTC.
As a result of a Korean Fair Trade Commission investigation into the San Diego-based chip maker, Qualcomm withheld $1 billion in rebates and other payments owed to Apple, alleged the California-based Apple in its U.S. lawsuit, filed on Jan. 20. While o demand for changes to its business model was made even as that probe led to a $853 million fine for .
"For many years Qualcomm has unfairly insisted on charging royalties for technologies they have nothing to do with," Apple said in a statement the same day it filed the lawsuit.
Challenging Qualcomm's full-device royalty model is the real intent of the suit. "They're very clearly trying to attack the business model - that's crystal clear," said Stacy Rasgon, an analyst with Bernstein.
This week, two law ssuit was also filed by Apple against Qualcomm in China. Chinese antitrust regulators did not take immediate aim at the chip maker's business practices either, despite fining Qualcomm $975 million in 2015.
Qualcomm said it would defend its business model in courts around the world on its earnings call on Wednesday.
"There has been no sudden change in the law to make this practice improper, and it remains the most efficient and fair method of licensing," Qualcomm President Derek Aberle said.

Christopher J. Mitchell

Markets | Companies | M&A | Innovation | People | Management | Lifestyle | World | Misc