Japanese antitrust regulators target Qualcomm

Japanese antitrust regulators have sent Qualcomm a draft order accusing it of illegally pressuring Japanese handset makers into unfair licensing agreements, according to a Reuters report. Qualcomm confirmed yesterday that it had received the draft order. The news comes less than a week after South Korean antitrust regulators fined Qualcomm $208 million for engaging in "unfair" business practices related to its chipset sales. 

According to the Reuters report, the Japanese Fair Trade Commission is looking into cross-licensing agreements the chip maker made with NEC Corp., Panasonic and Sharp. Qualcomm said it had received the draft order from the Japanese FTC, but would not comment on it until it had reviewed a full translation of the order.

However, Qualcomm did say the draft order seems to be directed at industry-standard licensing terms that Qualcomm said were "pro-competitive and the subject of intense negotiations with very substantial Japanese companies." Japanese customers accounted for 11 percent of Qualcomm sales over the past three quarters.

The fine issued by the South Korean FTC was largest it had imposed on a single company since 2005. Qualcomm said it disagreed with the ruling and would appeal it in South Korean court. Meanwhile, several major South Korean companies, including Samsung Electronics, LG Electronics and SK Telecom, said they would join up to develop chips for smartphones and digital TV sets--a move that could eat further into Qualcomm sales in the region. 

It is unclear how much long-term impact the investigations will have on Qualcomm's business. "With the Korea Fair Trade Commission investigation, in our opinion, largely behind us, the key remaining investigations are with the European Commission (EC) and the JFTC," UBS analyst Maynard Um wrote in a note to investors. "However, though this does not mitigate the potential overhang, we note many of the complaints to the fair trade commissions were, in our opinion, driven by business reasons by competitors, some of which are exiting the business or that Qualcomm has since settled with." 

For more:
- see this Qualcomm release [1]
- see this Reuters article [2]
- see this San Diego Union-Tribune article
[3]- see this WSJ article [4] (sub. req.) [3]

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