As the Obama Administration drew to a close, a divided Federal Trade Commission brought suit in U.S. district court against a company named Qualcomm, a manufacturer of chipsets which holds patents essential to the function of mobile phones and other consumer products.
The agency’s assertion the company uses anti-competitive tactics to maintain market share is controversial. A group of prominent conservative leaders labelled the case “a misuse of antitrust litigation to promote a destructive policy agenda that aims to undercut property rights and conservative free market principles” in a letter to President Donald J. Trump shortly after he was inaugurated.
To them, the suit is an invidious last minute regulatory action that should be dispensed with forthwith.
Now it is true federal agencies as a matter of course try to ram unfinished regulatory business through the system on their way out the door. The new acting chairman of the FTC, Commissioner Maureen Ohlhausen, is right to be on guard against such actions. She wants those under her authority to narrow the commission’s focus, placing a stronger emphasis on issues like fraud than her predecessor had and to fight for things like real protections for intellectual property.
She’s a good choice to lead the commission, and President Trump should choose her to chair it permanently. None of this means the Qualcomm complaint was without merit, as has been alleged. The company, the subject of three recent challenges to how it does business, has been previously found to have violated well-recognized, widely adhered to rules and laws for licensing of standard essential patents under “Fair, Reasonable and Non-Discriminatory” terms or, as it is known in the industry -- FRAND.
The FTC sued Qualcomm, claiming the company used its dominant market position to impose onerous terms on phone manufacturers, hobble competitors, and erect insurmountable barriers to market entry. Apple computer charged as a manufacturer of baseband chips, Qualcomm leveraged its monopoly position to seek “onerous, unreasonable and costly” terms for patents and blocked Apple’s ability to choose another supplier.
Intel, Broadcom, and Texas Instruments - all good American companies - have made similar claims. Apple is seeking $1 billion in rebate payments it claims Qualcomm withheld as retribution because Apple participated in an investigation conducted by South Korea’s competition regulator.
Failure to adhere to FRAND licensing practices harms competition for connected devices which drives up costs, limits consumer choice and slows innovation. New technologies -- devices, apps, and services - change constantly. With them changes the landscape of the dynamic wireless industry in a virtuous cycle of innovation. When FRAND licensing of standards-essential patents - SEPs - are observed things flourish and consumers benefit. When bad actors like Qualcomm dismiss their agreed upon licensing obligations and take unfair advantage of their power it creates a tremendous drag mobile innovation, to the consumers’ detriment.
Qualcomm exclusively manufactures its chipsets overseas; its competitors manufacture sophisticated chips in the U.S. It is not too much of a reach to presume they’d manufacture a lot more if Qualcomm would more fairly license its SEP technology in the mobile device space. An argument can be made, indeed is being made their anti-competitive practices keep jobs overseas that could just as easily be here in America.
The FTC should stand up its latest complaint rather than withdraw it. If the criticisms lodged against it are without value, and the company has done no wrong, it will have the chance to prove it.
Roff is a former senior political writer for UPI and a well-known commentator based in Washington, D.C. Email him at Peter.Roff@Verizon.net.