Apple-Qualcomm settlement doesn't end FTC antitrust claims

A sweeping settlement agreement Tuesday to end billions of dollars in disputes between Qualcomm Inc. (QCOM) and Apple Inc. (APPL) over licensing fees may not end an overlapping antitrust dispute against Qualcomm filed by the U.S. Federal Trade Commission.

According to a joint statement from the parties, the agreement settles “all litigation between the two companies worldwide,” and includes a payment from Apple to Qualcomm for an undisclosed figure, a six-year license agreement with a two-year option to extend, plus a multi-year chipset supply agreement.

The FTC’s action, filed against Qualcomm in a San Jose federal district court in 2017, alleges anti-competitive practices similar to those brought by Apple against Qualcomm in the now settled lawsuits. A decision from Judge Lucy Koh, who presides over the FTC case, could come at any time.

In its complaint, the FTC claims Qualcomm’s wireless chip business is a monopoly used to force Apple and other mobile phone manufacturers to pay excessive licensing fees. At issue is Qualcomm’s patented technology that controls whether mobile device chips can connect to wireless systems. The technology is part of Qualcomm’s portfolio of standard-essential patents, which cover technology required to implement a standard used by the general public.

Qualcomm suggested that the FTC’s action would instead hurt U.S. innovation and potentially aid Chinese tech giant Huawei in its efforts to dominate the global 5G ecosystem. Credit: David Foster

In November, Koh granted a partial summary judgement in the FTC’s favor, ruling that Qualcomm must issue licenses to rival chip makers for some of its standard-essential patents. Still to be decided is whether Qualcomm’s fees charged to use its patented technology are excessive.

As the FTC sees it, Qualcomm’s fees amount to an “anticompetitive tax” on users of rival company processors, which in turn reduces innovation and inflates consumer prices for mobile phones and tablets.

In a pre-trial brief, Qualcomm suggested that the FTC’s action would instead hurt U.S. innovation and potentially aid Chinese tech giant Huawei in its efforts to dominate the global 5G ecosystem.

“In its zeal to hobble a quintessential American technology company—without a shred of evidence regarding anticompetitive effects—the FTC risks providing an opening for Huawei to dominate 5G technology, and stifling innovation just when it’s needed most,” Qualcomm wrote in the brief.

Apple’s settlement with Qualcomm is expected to boost its ability to bring 5G mobile phones to market. During its disputes with Qualcomm, Apple ceased purchasing the company’s chips, and instead opted to purchase components from Intel, which does not yet offer 5G chips.

Yahoo Finance requested a response from the FTC concerning how Apple and Qualcomm’s settlement will impact the FTC’s decision. The FTC did not respond before publication of this article.

Alexis Keenan is a New York-based reporter for Yahoo Finance. She previously worked for CNN and is a former litigation attorney. Follow on Twitter @alexiskweed.