Judge Rules Qualcomm Violated Antitrust Law

But not so fast. Now our federal judge has ruled that Qualcom violated anti trust law by abusing its dominant position in the market for cell phone chips to exact excessive licensing fees, giving the FTC the win. Joining me as Harry first professor of anti trust law at n y U Law School. So Professor Judge Lucy co ruled against Qualcom on virtually every point and said that it's licensing practices have strangled competition in certain modem chip markets.

Is that exactly what Apple had accused it of? Well, um, Apple accused it of exacting excessive royalty rates UM and forbidding it from using through its exclusivity agreements, from using other chips, particularly chips by Intel. The two cases are similar in the sense that the Federal Trade Commission had included Apple's exclusivity agreements in its case, but um the two parties are really seeking different things. So Apple was seeking lower royalty rates in the end, the Federal Trade

Commission is really attacking um uh Qualcomm's business model. UM, but it too was very worried about the high prices that um qualcomm has been able to exact on its patent licensing. As far as the judge's opinion was, with her language very strong, I think very is a is a weak adjective. Uh. Very yes, very strong, although in

some ways not surprising. She had been ruling in preliminary rulings, particularly at a fairly recent stage in the proceedings that it looked pretty much like the Federal Trade Commission UM case was pretty strong, So I actually wasn't surprised at how she came out. But when you read through her opinion, it's really a litany of um uh qual comes licensing practices, what their intent was, and what the effect has been on innovation and pricing UH in in cell phone technology

and handsets more generally. So UM It's it is quite strong. UH it's based on UM, you know, trial hearing witnesses doing the things that trial core judges are supposed to do, which is to judge the evidence, assess the credibility of the um of the various witnesses on both thoughts, and come to a decision. So it's it's a pretty strong case. What about the remedies. What kind of remedies did she

order and will they disrupt Qualcom's business model? Well, UM, the remedies that she ordered were targeted pretty much too UM the allegations of the Federal Trade Commission's complaint. So a primary UM part of the complaint was UM. Well, actually two things. The policy of UM no chips, no license, UM, you had to if you wanted the chips, you had to license the technology, which the Commission said kept prices up. So she said you can't do that. UM. They have to.

They're licensing for the technology can be subject to just mute UM and arbitration UM. And they also now in addition to licensing handset makers, they have to license competing

chip makers UM. And that's been a big source of UM major contention and a way that Qualcom has been able to obtain higher royalty rates by not licensing the chip makers, which means that any handset maker, even if they buy chips from someone else, still has to take a license from qualcom UH and still has to pay royalties, and the royalties are high. Will that will her remedies

possibly lower costs for Apple and other smartphone makers? They well, there are a lot of smartphone makers, Um, they the UM Commission and her opinion talked about six of them. So yes, it should lower costs for them, and it it ought to in the end lower prices for consumers. A lot of people buy UH smartphones and they've been paying UM these rates that are higher than the rates really that qualcom UH in a sense had promised UH to charge. And when those rates go down, that's a

major part of the costs of of a handset. So yes, it should be should lead to lower prices for the makers and for consumers in the end. Now Qualcolm said it quotes strongly disagrees with the judges conclusions or interpretation of the facts and her application of the law, and it will appeal. What are its chances on appeal, Well, it's always hard to say exactly. Um. That the it becomes difficult to appeal cases that have been tried where

a judge has made uh strong factual findings. Um, i'd like in the case, I would uh say, in that way, it's similar to the case that was brought in the late nineties against Microsoft, where the judge made extensive factual findings which very much supported the decision of the Court

of Appeals to affirm what the judge did. So they have a bit of a hard slog to go against those findings, the two thirty page opinions, and uh, it's it's very hard to overturn factual findings, you know, unless they're clearly arbitrary, So so they'll have a problem making those change. So. Qualcom currently has the most advanced five gen modems in the market, and the Trump administration has said it's vital to us competition with China in that technology.

It went so far as to interfere or try to interfere in these proceedings by asking the judge for hearing on any remedies. Is there any kind of interference that the administration could do at this point? Well, um, I I'm not sure. The Trump administration has lots of different policies that get expressed in different ways, So uh, in

any trust cases. It's true the Justice Department did file a rather extraordinary petition to get involved at the remedy hearing, But in terms of how that works out in an an appeal in this case, UM, it's hard for me to see it going another way any way other than um, was there some mistake in law? Did the judge improperly grant the remedy? Whether the Justice Department will file a brief in the Ninth Circuit Court of Appeals on qualcom side,

We'll just have to see. I'm a little be a little careful about talking some sort of overall Trump administration policy towards qualcom um, because any trust policies tend to be a little more targeted and focused and not so much focused on UM competition with China or UM. You know how all of this will affect that. All right, Well, thank you so much for joining us. Professor that's Professor Harry First of n y U Law School. Thanks for

listening to the Bloomberg Law Podcast. You can subscribe and listen to the show on Apple Podcasts, SoundCloud, and on Bloomberg dot com slash podcast. I'm June Brasso. This is Bloomberg