On 11 October 2017, following an investigation launched in February 2015, the Taiwan Fair Trade Commission (TFTC) announced its decision to impose a fine of TWD23.4 billion (approximately USD773 million) and a corrective order on US chipmaker Qualcomm for abuse of market dominance in the market for baseband chips for mobile communications standards including CDMA, WCDMA and LTE.
The TFTC found Qualcomm to own considerable standard essential patents (SEPs) and to have a dominant position in the baseband chip market. It also found that Qualcomm: (i) refused to license SEPs to rival chipmakers; (ii) coerced mobile phone manufacturers to sign unfair licensing agreements by linking chipset supply with patent licence contracts; and (iii) imposed exclusive terms on licensing agreements. This conduct increased the trading costs between phone manufacturers and Qualcomm’s competitors, thereby forcing phone manufacturers to accept disadvantageous terms, deprived or lowered competitors’ opportunities to do business, and/or reduced their ability to withstand price competition. Since Qualcomm’s competitors could not circumvent the SEPs, they had to raise prices to offset the increased costs, which led to a decrease in demand for their products, thus excluding them from competing with Qualcomm. The TFTC therefore concluded that Qualcomm’s licensing practices in Taiwan restricted and harmed competition in the baseband chip market, breaching the Taiwan Fair Trade Act.
This is the largest fine levied on a single company by the TFTC and marks the third recent major Asian antitrust enforcement ruling against Qualcomm. In early 2015 the Chinese National Development and Reform Commission imposed a fine of RMB6.08 billion (approximately USD975 million) on Qualcomm for its unfair patent-licensing practices; and in December 2016 the Korean Fair Trade Commission fined
Qualcomm KRW1.03 trillion (approximately USD865 million), again for similar patent-licensing practices.
It is worth noting that the TFTC’s fine of TWD23.4 billion is indeed very significant, especially when compared proportionally with Taiwan’s much bigger neighbours, China and South Korea. Unlike in Europe, but not uncommonly in Asia, there is no further detail in its public decision of how the TFTC arrived at this level of fine. If Qualcomm’s recent encounter is the beginning of a growing trend of high antitrust fines in multiple jurisdictions across Asia, this will rapidly become a very significant risk area for companies facing antitrust investigations by Asian competition authorities.
In addition to the fine, the TFTC also imposed a corrective order requiring Qualcomm to stop its abusive behaviour and re-negotiate concluded agreements in good faith with competing chipmakers and mobile phone manufacturers.
Qualcomm released a statement the next day outlining its intention to seek a stay of the corrective order and appeal against the TFTC’s decision to the Taiwanese courts after receiving the formal decision.
Qualcomm also intends to appeal the amount of the fine and the methodology adopted in calculating it.