Query: Qualcomm and monopoly

Candidate papers:

abstract: \noindent The Chinese competition authority announced a sanction against Qualcomm, a leading semiconductor manufacturer in the United States. This study investigates whether Qualcomm's pricing strategy limited competition with its rivals. The study estimated two demand functions for handsets and integrated circuit (IC) chips, as well as the marginal cost of smartphones. It then factored in the price of IC chips. Based on the estimated prices of chips and demand parameters, the study identified the competitive relationship regarding the IC chips at the product level. I found followings; the cost of smartphone handset that installed Qualcomm's chipset is lower than that installed its rivals' products. Meanwhile, Qualcomm's chip generates a higher willingness to pay via transactions with increasing numbers of handset assemblers. Qualcomm did not commit vertical foreclosures since its product is not exclusive, and increased number of customers and WTP and higher prices of their products. However, it committed horizontal foreclosures, as evident from the pricing of the license fee, where Qualcomm limits competition by raising the cost for rivals; this observation is consistent with the authority's judgment. This anti competition conduct is most severe in the CDMA2000 market in China.
author_names: Mariko Watanabe
title: Horizontal Foreclosure With Vertically Shared Large Value: Qualcomm's License Fee Contracts and Anti Monopoly Decisions of Competition in the Smartphone Integrated Circuits Market of China, 2011 2014
year: 2020

abstract: It is the range of behavioral remedies agreed to that may well have the greatest long term significance. James F. Rill James Kress (Baker Botts)
author_names: James F Rill

James Walter Kress
title: The Application of ChinaaEUR(tm)s Anti Monopoly Law to Essential Patent Licensing: The NDRC/QUALCOMM Action
year: 2015

abstract: On February 10, 2015, as one of the global antitrust enforcement powerhouses by now, the National Development and Reform Commission of PRC "NDRC" issued its sanction decision against the US.
author_names: Ken Dai

Jet Zhisong Deng
title: The Chinese NDRC applies rigorously the Anti monopoly Law and fines a compagny for abuse of dominant position (Qualcomm)
year: 2015

abstract: Prohibition of unfair pricing is an area that has seen a growing number of enforcement activities in China. Unfair pricing, also called excessive pricing in some cases, is ruled under Article 17, Paragraph 1, of the Anti Monopoly Law "AML" whereby dominant firms are prohibited to "sell commodities at unfairly high prices or buy commodities at unfairly low prices." In this chapter, we will introduce the relevant legal framework and provide a review of recent typical cases. The major cases include the investigation against Qualcomm Incorporated "Qualcomm" by the National Development and Reform Commission "NDRC" and the landmark decision issued by the Shenzhen Intermediate People's Court in Huawei v. InterDigital. Both cases are related to licensing patents that are essential to standards. There are also several rulings in the markets of certain essential input products such as natural gas pipelines and essential drugs. Given the role of the Chinese economy in the world, a review of anti monopoly enforcement in this field would be helpful to practitioners and researchers.
author_names: Xiaowen Fu

Heng Ju
title: Anti monopoly Cases on Unfair Pricing in China
year: 2018

abstract: THE EU'S RECENT ANTITRUST FINES against several leading international tech and platform firms are startling: Google was fined $5.1 billion for alleged tying and exclusivity arrangements related to pre installed search and $2.7 billion for allegedly "favoring" its own comparison shopping service; Qualcomm was fined $1.22 billion for allegedly paying Apple not to buy chips from rivals; and Intel was fined $1.3 billion (which was set aside by the EU Court of Justice) based on the claim that it abused loyalty rebates. But why are these firms penalized in the EU for dominance "abuses," yet they go unscathed in the United States for the same or similar practices? Some in the business community view these divergent outcomes as "techlash" outright frontal attacks on U.S. innovation and success; others attribute it to differences in enforcement systems and objectives, including the EU's continuing effort to build a discrimination free "internal market" among Member States. In the midst of these dramatically different outcomes, both jurisdictions, at least publicly, continue to seek convergence on monopoly/dominance law and policy to the extent feasible.1 The goal of this article is two fold: first, to provide a summary of where full or partial convergence has occurred; second, and perhaps more importantly, to detail the procedural and substantive areas of continued divergence.
title: Why the Atlantic Divide on Monopoly Dominance Law and Enforcement Is So Difficult to Bridge
year: 2018

abstract: Will the U.S. International Trade Commission (ITC) or the Antitrust Division set policy on monopoly and innovation? I submit this memorandum to the Antitrust Division to pose this question, which arises from the ITC's serious misapplication of antitrust law and economics in Investigation No. 337 TA 1065, Certain Mobile Electronic Devices and Radio Frequency and Processing Components Thereof (the 1065 Investigation) I was an expert economic witness for Qualcomm in this patent infringement dispute with Apple. I explain in this memorandum why it is my opinion that the administrative law judge (ALJ) in the 1065 Investigation reached findings that conflict with controlling American antitrust jurisprudence. Those errors concern (1) the incorrect inference of monopoly power from market share alone and (2) the incorrect view that Schumpeterian competition across successive generations of monopoly cannot deliver innovation and lower quality adjusted prices. The ALJ's findings drive a wedge between the Antitrust Division and the ITC on how properly to use economic principles to diagnose monopoly power. As the quality of administrative adjudication deteriorates at the ITC, patent holders engaged in global disputes over licensing or infringement can choose to litigate their multijurisdictional disputes before highly sophisticated tribunals in other countries. Given what the 1065 Investigation reveals about how far the ITC's economic sophistication on monopoly and innovation lags behind that of the Antitrust Division, why would any patent holder having the choice litigate before the ITC rather than a court in London or Germany or China?
author_names: J Gregory Sidak
title: Memorandum: Will the International Trade Commission or the Antitrust Division Set Policy on Monopoly and Innovation?
year: 2018

abstract: On January 17, 2017, the U.S. Federal Trade Commission (FTC) filed a lawsuit against Qualcomm Incorporated based on a "monopoly broth" or course of conduct theory for alleged monopoly maintenance in certain narrowly defined baseband processor markets. The vote to file the complaint was 2 1 over the dissent of now Acting Chairman Maureen Ohlhausen, who described it as "an enforcement action based on a flawed legal theory (including a standalone Section 5 count) that lacks economic and evidentiary support, that was brought on the eve of a new presidential administration, and that, by its mere issuance, will undermine U.S. intellectual property rights in Asia and worldwide." In a jurisdiction on the other side of the globe, the Korean Fair Trade Commission (KFTC) had issued an administrative decision against Qualcomm on December 28, 2016, concluding that the company employed an "unfair business model" with respect to the licensing of its 2G (CDMA) 3G (WCDMA) and 4G (LTE) standard essential patents (SEPs) and the sale of its baseband processors, and imposed global portfolio wide remedies and a fine of KRW 1.03 trillion (approx. US $853 million) This article provides a legal and economic comparative analysis of the FTC's complaint and the KFTC's decision, highlighting the fundamental differences between the two and setting forth some of the main economic and legal problems with each. As an initial matter, it is important to bear in mind that the FTC's complaint is not a decision, but rather a set of allegations filed in court to initiate the court's resolution of the issues. Meanwhile, Qualcomm has stated that it will appeal the KFTC's administrative decision, and has requested a stay from the Seoul Central District Court. With respect to the substantive allegations, there are some similarities in the two cases but the main theories of harm differ significantly. For example, the KFTC concluded that Qualcomm possesses dominance in 2G, 3G, and 4G technologies: "As SEPs cannot be replaced by other technologies, a SEP holder gains complete monopolistic power by holding even a single SEP," while the FTC limited its market power allegations to CDMA baseband processors and premium LTE baseband processors. Unlike the KFTC's decision, the FTC's complaint contains no allegation that Qualcomm engaged in unlawful tying or bundling by licensing on a portfolio bases, nor does the FTC allege that Qualcomm violated U.S. antitrust laws by allegedly requiring royalty free cross licenses. To the extent that any other competition agency is relying upon the FTC's complaint to state a theory of harm with respect to SEP licensing practices, it would be well advised to read the complaint carefully. If a foreign agency is seeking FTC endorsement of any particular theory, it would be wise to reserve judgment until at least the appointment of new FTC Commissioners and, if the agency does not then withdraw the complaint, until the court has ruled on the FTC's ambiguous and highly controversial theories of harm.
author_names: Koren W Wong-Ervin

Douglas H Ginsburg

Anne Layne-Farrar

Scott Robins

Ariel Slonim
title: A Comparative and Economic Analysis of the U.S. FTC's Complaint and the Korea FTC's Decision Against Qualcomm
year: 2017

abstract: The Chinese Anti Monopoly Law (AML) has attracted much attention in recent years. There have been accusations of protectionism and of the AML being used to target foreign companies. Against this backdrop, the investigation by the National Development and Reform Commission (NDRC) against Qualcomm over the latter's licensing practices was especially controversial. This was particularly so because China has long complained about the high licensing fees its domestic manufacturers have to pay to foreign patentees. And Qualcomm is a major licensor of communications technologies and earns a very considerable amount of licensing revenue in China. Qualcomm was eventually slapped the largest fine in the history of Chinese AML enforcement and subject to a number of behavioural remedies. The question arises as to whether the NDRC decision was a poorly reasoned protectionist venture or was in fact consistent with sound competition law principles. This article attempts to answer this question by critically evaluating the reasoning of the decision. It finds that even though the NDRC reached the correct conclusion on some of the claims, the analysis and the reasoning leave much to be desired. K E Y W O R D S China, Qualcomm, patents, no challenge clauses, package licenses, royalty free grantbacks J E L C L A S S I F I C A T I O N S K21 I I N T R O D U C T I O N Since the passage of the Anti Monopoly Law (AML) in China in 2007, there has been considerable attention on the treatment of intellectual property rights under the AML. Article 55 of the AML indicates that the lawful exercise of intellectual property rights will be respected by the AML whereas abuse of such rights will be prohibited. The notion of abuse is of course not self explanatory and its explication must await enforcement by the enforcement authorities and court decisions. In the Thomas K Cheng, Associate Professor, Faculty of Law, University of Hong Kong. Email: thomas.cheng@hku.hk VC The Author 2016. Published by Oxford University Press. All rights reserved. For permissions, please e mail: journals.permissions@oup.com 1 Journal of Antitrust Enforcement, 2016, 0, 1 24 doi: 10.1093/jaenfo/jnw005 Article Journal of Antitrust Enforcement Advance Access published May 11, 2016 by gest on July 7, 2016 http:/antitxfordjournals.org/ D ow nladed from initial few years of AML enforcement, there was a relative lack of enforcement action and cases involving the exercise of intellectual property rights. The first prominent AML case involving intellectual property rights was probably Huawei v Interdigital, a case which began in the Shenzhen Intermediate People's Court and was eventually appealed to the Guangdong High People's Court. The case concerned Interdigital's alleged violation of its FRAND obligations pertaining to the licensing of its patents over telecommunications technology. Even though this case did attract considerable attention at the time, the most prominent AML case involving intellectual property rights thus far is no doubt the investigation by the National Development and Reform Commission (NDRC) against the US technology giant Qualcomm. This article critically evaluates the NDRC decision. It will do so in light of both established Chinese competition law principles, as gleaned from the various laws, regulations, and guidelines, and where appropriate, case law, and economic arguments. Economic arguments are especially important for analysing patent licensing practices in the current Chinese context. Given the bare bone nature of many of the issued regulations and guidelines and the dearth of case law given the relatively short history of enforcement, existing Chinese competition law jurisprudence does not offer much guidance on patent licensing practices. Many of the issues decided by the NDRC in this case are sui generis under Chinese law. Therefore, economic arguments will provide an important yardstick for judging the soundness of the NDRC's decision. I I M A R K E T D E F I N I T I O N A N D A S S E S S M E N T O F M A R K E T P O W E R The NDRC began its investigation of Qualcomm's licensing practices in November 2013. The announcement immediately garnered much attention as this was the first investigation by a PRC enforcement authority against a foreign technology company, and a very prominent at that. The investigation proceeded throughout 2014, with multiple rounds of negotiation between Qualcomm and the NDRC. The NDRC finally handed down its decision on 9 February 2015, imposing a fine of RMB6.088 billion (approximately USD975 million) and a host of behavioural remedies. 1 Huawei Technology v Interdigital Technology, Judicial Opinions of China, 7 March 2014 (Shenzhen Interm People's Ct, 9 January 2014) (hereinafter 'Huawei Shenzhen' 2 Huawei Technology v Interdigital Technology, Westlaw, 7 March 2014, (Guangdong High People's Ct, 21 October 2013) (hereinafter 'Huawei Guangdong' 3 Huawei v Interdigital (n 2) 1. 4 National Development and Reform Commission Administrative Penalty Decision [2015] No 1, 9 February 2015 (hereinafter 'Qualcomm Decision' 5 Supantha Mukherjee and Neha Alawadhi, 'China Probe May be Aimed at Qualcomm's 4G Royalties' Reuters (26 November 2013) accessed 27 April 2016; Spencer E Ante and Don Clark, 'Qualcomm Faces Probe in China Tied to Antimonopoly Law' Wall Street Journal (26 November 2013) accessed 27 April 2016. 6 Kevin Yao and Matthew Miller, 'China Accuses Qualcomm of Overcharging, Abusing Dominance' Reuters (19 February 2014) accessed 27 April 2016; Phil Goldstein, 'Qualcomm Could be Nearing Settlement of Chinese Antitrust Investigation' FierceWireless (22 August 2014) accessed 27 April 2016. 7 Qualcomm Decision (n 4) s 3(2) 2 Journal of Antitrust Enforcement by gest on July 7, 2016 http:/antitxfordjournals.org/ D ow nladed from Market definition The NDRC decision alleges that Qualcomm abused its market dominance in a number of technology related markets, including the licensing of CDMA, WCDMA, and LTE wireless communications standard essential patents (hereinafter 'wireless SEPs' and the sale of CDMA, WCDMA, and LTE wireless communications terminal baseband chips (hereinafter 'baseband chips' The NDRC defines the relevant markets as those for the licensing of CDMA, WCDMA, and LTE SEPs and the sale of CDMA, WCDMA, and LTE baseband chips. The NDRC substantiates its market definition regarding SEP licensing on the following grounds. First, the NDRC argues that there is little scope for substitution between different technologies. There are very high costs for substitution between different wireless communications technology standards for telecom network operators, wireless communications terminal manufacturers, and baseband chip producers. They need to make substantial investments to construct networks or develop products that are compliant with the specific wireless communications technology standards. Therefore, the switching costs for the network operators and the baseband chip producers are very high. Meanwhile, the technical need for substitution is low as different wireless communications technologies essentially perform the same functions. Moreover, there is significant lockin effect for network operators. When a telecom network operator upgrades its infrastructure to a new generation of a particular technology standard, there is a general requirement that the wireless communication terminals support previous generations of the same technology standard. This is to ensure that customers who have not switched to the latest generation of the technology standard can continue to use the services provided by the network operator. Therefore, substitution between different technology standards in reality is highly unlikely. Having established the lack of substitutability between different technology standards, the NDRC proceeds to illustrate the importance of SEPs in the implementation of a particular technology standard. The NDRC defines a separate relevant product market for each wireless SEP license. Once a patent has been incorporated into a standard, it becomes unique and non substitutable. Wireless communications terminal manufacturers must obtain a license to every patent incorporated in a standard in order to produce products that would be compliant with the relevant technology standard. The NDRC argues that there is little demand side substitution because each wireless SEP is indispensable to the production of specific wireless communications terminals. The absence of any wireless SEP would render the terminal noncompliant with the technology standard and useless in the eyes of the customers. The NDRC also argues that there is little scope for supply side substitution because after incorporation into a technology standard, each wireless SEP is unique and irreplaceable. Lastly, the NDRC concludes that due to Qualcomm's licensing practices, the relevant geographic market is an aggregate of countries or regional markets for those wireless SEPs held by Qualcomm. 8 ibid s 1(1) and (2)
author_names: Thomas K Cheng
title: The PRC NDRC Case against Qualcomm: A Misguided Venture or Justified Enforcement of Competition Law?
year: 2016

abstract: China's National Development and Reform Commission (NDRC) issued its first antitrust administrative sanction decision relating to SEP licensing in 2015, finding that Qualcomm had abused its dominant position in the CDMA, WCDMA and LTE wireless communication standard essential patents (SEPs) licensing market and baseband chip sale market by: (a) charging unfairly excessive royalties, (b) unreasonably bundling SEPs licensing with non SEPs, and (c) making the sale of baseband chips conditional upon the buyer signing a patent license agreement with a patent no challenge clause and other unfair clauses. As a result, Qualcomm was ordered to cease its abusive acts and was fined RMB 6.088 billion (approx. USD 975 million) the severest ever imposed by the NDRC or any other Chinese Anti Monopoly Enforcement Authorities (AMEAs) under its Anti Monopoly Law (AML) This article provides a structured description of the NDRC's findings, explores the NDRC's two step approach of "the rebuttable assumed dominance" for SEPs and its flexible antitrust approach to correct Qualcomm's SEPs package licensing practice, and lastly comments on the commercial and industrial significance of this decision in China and beyond.
author_names: Yanbing Li
title: Antitrust Correction for Qualcomm's SEPs Package Licensing and Its Flexibility in China
year: 2016

abstract: On March 2, 2015, China's National Development and Reform Commission "NDRC" the agency responsible for investigating price related violations of China's Anti Monopoly Law (the "AML" published a.
author_names: Cunzhen Huang

Maurits Dolmans

Stephan Barthelmess

Anita Ng

Tara Tavernia
title: The China's NDRC imposes changes in licensing practices (Qualcomm)
year: 2015