By Eun-Young Jeong
SEOUL--A South Korean regulator said it would fine Qualcomm Inc. $852.9 million for alleged antitrust violations, the highest such penalty handed to an individual company here, as the U.S. chip maker faces global scrutiny over its patent-licensing business.
The Korea Fair Trade Commission said on Wednesday that Qualcomm breached antitrust law by limiting the access of competing chip makers to its patents. The company forced mobile-phone manufacturers into unfair license agreements by refusing to supply crucial phone chips to thosethat disagreed with its terms, the regulator said.
The chip supplier also used its market position as a leveraging tool in its negotiations with mobile-phone makers to force them to accept unfair conditions, said Shin Young-son, the commission's secretary-general.
San Diego-based Qualcomm dismissed the charges, saying that it hasn't hindered other chip suppliers' ability to sell. The practice of licensing at the device level is an industrywide norm, said Don Rosenberg, the firm's general counsel.
The company said it would contest the decision. In a statement, Qualcomm said its licensing practices have existed in Korea and world-wide for decades, and that the regulator hadn't questioned them in the past.
The commission's decision doesn't take effect until it issues a written formal ruling, which can take several weeks or months. Qualcomm can initiate its appeal process to Seoul's High Court following the written order.Qualcomm garnered more than $25 billion in revenue last year, of which about 30% stemmed from its patent-licensing business. Qualcomm declined to comment on revenue breakdowns by country.
Qualcomm charges handset makers royalties based on a percentage of the price of their handsets. The company doesn't typically issue licenses for its wireless technology to other chip makers.
"The worry is not the fine--Qualcomm has deep pockets. The worry is about potential changes to the business model, if any," said Stacy Rasgon, an analyst with Sanford C. Bernstein. Any requirement that Qualcomm change its licensing practices could affect its approach to business in other countries, he said.
Qualcomm is a client to Samsung Electronics Co.'s foundry business unit and a supplier for the South Korean company's smartphone chips. The two companies compete in supplying processor chips for mobile phones.
There was no immediate reaction Wednesday from mobile-phone makers.
Last year, Qualcomm agreed to a settlement with antitrust authorities in China that included a $975 million fine and a requirement that the company alter its business practices.
Write to Eun-Young Jeong at Eun-Young.Jeong@wsj.com
(END) Dow Jones Newswires
December 27, 2016 23:47 ET (04:47 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.