S. Korea fines Qualcomm 260 bln won for unfair practices

(ATTN: RECASTS lead; SPECIFIES possible options for Qualcomm in 10th para; ADDS
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SEOUL, July 23 (Yonhap) -- South Korea's antitrust watchdog slapped Qualcomm Inc.
with a record 260 billion won (US$208 million) fine Thursday in a tough ruling
against the U.S. company for violating the nation's fair competition rules by
abusing its market monopoly.

The Fair Trade Commission (FTC) made the decision after years of investigation
into whether the mobile chipmaking giant engaged in improper business practices
aimed at consolidating its market dominance.
The fine is the largest ever levied by the watchdog on a single company. In 2005,
the FTC levied a 113 billion won fine on local fixed-line telecom giant KT Corp.
"We decided to impose the fine on Qualcomm for abuse of its status as market
leader by imposing royalties in a discriminative way and offering conditional
rebates (depending on use of its products)," Suh Dong-won, vice chief of the FTC,
told a press conference.
Qualcomm had been demanding higher royalties from companies that use products
made by its competitors, while providing more rebates to its clients that adopt a
large portion of its chipsets to consolidate its market share, Suh said.
The U.S.-based company owns key patents for the code division multiple access
(CDMA), the most widely used wireless network standard in the world along with
the global system for mobile communications.
South Korea is one of major markets for Qualcomm as it is home to Samsung
Electronics Co. and LG Electronics Inc., the world's leading mobile handset
manufacturers.
Qualcomm has been earning a large amount of royalties from handset makers in
South Korea where more than nine out of 10 people carries a mobile phone. The
company accounted for 99.4 percent of the nation's CDMA modem chip market in
2008.
An investigation was launched into Qualcomm when a local company that makes
software for mobile phones filed a complaint in February 2006, claiming it
hindered competition by unfairly bundling its products.
A spokesman for the Korean unit of Qualcomm could not be reached for comment.
Qualcomm can appeal the ruling to the FTC or bring the matter to court, according
to officials at the watchdog.
The tough regulatory action comes after the watchdog slapped a 26 billion won
fine on U.S. computer chipmaking giant Intel Corp. in June last year. In 2005,
Microsoft Corp. was ordered to pay 32.4 billion won in fines for bundling
software programs with its flagship Windows operating system.
The ruling against Qualcomm is expected to bolster competition in the chipset
market by encouraging entry of more companies, eventually helping lower product
prices. Handset manufacturers will also be among the beneficiaries as the ruling
will likely lead to an increase in options for chip suppliers, the watchdog said.
South Korea is the first country to take such an action against Qualcomm's
anti-competition business practices, setting the tone for the future
investigation or measures taken by the European Union and U.S. authorities
against the chipmaking giant, experts say. Reportedly, a similar investigation is
underway in the EU.
Established in 1985, Qualcomm retains top status in the mobile chipmaking market.
It first developed the CDMA-based communications standard in 1989, holding around
40,000 patents in connection with mobile technologies.
Qualcomm posted $3.87 billion in sales from patent licensing in South Korea in
2007, which accounted for around 35 percent of its total sales that year,
according to the watchdog.
kokobj@yna.co.kr
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