EDITORIAL from the Korea Times on July 25)

Fine on Qualcomm

Every company in the free market economy is required to play the game. There is
no doubt that if a business is engaged in unfair practices, its competitors and
consumers may inevitably be subject to damage. That's why fair competition is
vital to capitalist society. However, the stark reality shows that some companies
have continued to abuse their monopolistic status to inappropriately solidify
their operations and maximize their profit at the sacrifice of other firms and
consumers.
One such firm is Qualcomm, which was found to have violated fair competition
rules in South Korea. On Thursday, the Fair Trade Commission (FTC) slapped a
260-billion-won ($208 million) fine on the U.S.-based company for abusing its
dominant position in the Korean market for code division multiple access (CDMA)
mobile phone chips. Qualcomm owns the origin of CDMA technology and controls 99.4
percent of Korea's CDMA modem chip market.
The fine is the largest ever imposed by the nation's antitrust watchdog, followed
by a 113-billion-won penalty on fixed-line telecommunication giant KT in 2005.
The FTC also fined Microsoft Corp. 32.4 billion won in 2006 for bundling software
programs with its Windows operating system. U.S. chipmaking giant Intel Corp. was
ordered to pay 26 billion won in fines for its unfair practices in June last
year.
The FTC accused Qualcomm of collecting royalties from Korean handset makers,
mainly from Samsung Electronics and LG Electronics, in a discriminative way and
offering conditional rebates to them in return for purchasing its CDMA modem
chips. CDMA is the most widely used mobile technology in Korea, allowing phone
users to cram more information across limited bandwidths. By taking advantage of
its dominant status and unfair practices, Qualcomm garnered $3.8 billion in
revenue in South Korea in 2007. The sum accounted for 35 percent of the firm's
total revenues.
The FTC's tough regulatory action came after two U.S. companies ??? Texas
Instruments and Broadcom ??? and Korean firms, Nextreaming and Thin Multimedia
Broadcom, filed complaints against Qualcomm three years ago. Some local companies
could hardly enter the modem chip market due to Qualcomm's anti-competition
practices. It is natural that the market has welcomed the ruling by the FTC,
which also ordered Qualcomm to end its unfair practices and stop taking
technology royalties after the effective royalty agreement period expires.
It's time for the American firm to humbly accept the penalty and the order in a
move to play fair. However, Qualcomm said it would appeal, saying that its
business practices were ``legal, appropriate and competition-friendly." It is up
to the company whether it will wage a court battle over the FTC action. But it is
clear that Qualcomm has abused its monopolistic position to virtually block its
competitors from entering the market.
Qualcomm is also under investigation over its alleged unfair practices in Japan
and the European Union. We have to watch closely what decision Japanese and EU
regulators will make. It is necessary for the firm to make efforts to rectify its
practices as soon as possible in order to comply with competition rules
faithfully and thereby protect consumers. We hope that the prices of mobile
phones will go down by promoting fair competition in the market.
(END)