Blog Coverage Qualcomm to Appeal Against Heavy Fine Imposed by South Korean Anti-Trust Regulator
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LONDON, UK / ACCESSWIRE / December 29, 2016 / Active Wall St. blog coverage looks at the headline from Qualcomm Inc. (NASDAQ: QCOM). In response to the $854 million fine imposed by The Korea Fair Trade Commission (KFTC) for alleged "unfair business practices", Qualcomm said on December 28, 2016, that it will appeal against the decision in the Seoul High Court. Register with us now for your free membership and blog access at: http://www.activewallst.com/register/.
One of Qualcomm's competitors within the Communication Equipment space, CommScope Holding Co., Inc. (NASDAQ: COMM), is estimated to report earnings on February 17, 2017. AWS will be initiating a research report on CommScope Holding in the coming days.
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Commenting on the Company's stance, Don Rosenberg, Executive Vice President and General Counsel at Qualcomm said:
"Qualcomm strongly believes that the KFTC findings are inconsistent with the facts, disregard the economic realities of the marketplace, and misapply fundamental tenets of competition law."
KFTC findings and stance
Following a three-year long investigation and based on its findings, KTFC on December 28, 2016, imposed a fine of $854 million on Qualcomm for abusing its dominant market position as a maker of baseband chipsets used in mobile phones. This is the highest ever fine imposed by the South Korean anti-trust regulator till date.
The exact details of KTFC's decision will be only available after a written order. This could take anywhere between 4-6 months time. The decision will not be effective till such time. However, Qualcomm will be liable to pay the fine within 60 days of KTFC's written order with a proviso for adjustment in the amount or refund due to the appeal at a later date.
The investigation against Qualcomm was started by KTFC in 2014 based on complaints received from industry members. KTFC determined that Qualcomm and two of its affiliates had violated rules by refusing to offer licenses that are essential for manufacturing chipsets to rival manufacturers and had imposed unfair contracts on the smartphone makers. Along with the fine KTFC also ordered the Company to rework its patent licensing with rival chipmakers and to renegotiate chip supply agreement with handset manufacturers.
Earlier in 2009, KTFC had fined Qualcomm 273 billion won for abusing its dominant position in the CDMA chips. These CDMA chips were at that time used by phones manufactured by Samsung and LG. KTFC's decision would have a long-term impact on the prices of the chips sold by Qualcomm and used by phone manufacturers.
Qualcomm's defense
Qualcomm did not agree with KTFC's decision and called it "unprecedented and insupportable". Qualcomm has said that it would appeal against the decision in the Seoul High Court as soon as it received the written order. The Company will also appeal against the amount of fine imposed and the method used by KTFC to calculate the fine.
Qualcomm feels that the decision is inconsistent with facts and law. There was no evidence that indicated impairment to competition. The regulator denied Qualcomm access to evidence gathered and the right to cross examination at the hearing. Qualcomm feels that the decision will disrupt the licensing practices currently in place in the wireless industry and followed by major patent holders including Korean companies and government entities. The decision also goes against the intellectual property rights enjoyed by the Company as per international law.
Qualcomm is already facing anti-trust probes in the United States, the European Union, and Taiwan. In February 2015, Qualcomm was fined $975 million by China's National Development and Reform Commission (NDRC), for a breach of the country's anti-monopoly law. Qualcomm did not dispute the decision and assured the Chinese regulator that it will modify its business practices in the country and pay the fine. The current decision by KTFC will influence the decisions of the anti- trust regulators in US, Taiwan, and Europe in the future.
Stock Performance
At the closing bell, on Wednesday, December 28, 2016, Qualcomm's stock declined 2.23%, ending the trading session at $65.75. A total volume of 6.42 million shares were traded at the end of the day. In the last six months and previous twelve months, shares of the company have rallied 24.79% and 33.85%, respectively. Moreover, the stock soared 36.23% since the start of the year. The stock is trading at a PE ratio of 17.27 and has a dividend yield of 3.22%.
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