Qualcomm fined $853 million by South Korean regulator

The President has blocked the takeover.

Qualcomm Inc (NASDAQ:QCOM) has been fined 1.03 won ($853 million) by the South Korean antitrust regulator over unfair business practices in patent licensing and modem chip sales.

“Qualcomm has forced unilateral, unfair terms on licensing contracts without going through a fair calculation process,” said Secretary General Shin Young-son, director at the Korean Fair Trade Commission. “This would be our first ruling to correct Qualcomm’s unfair business model . . . to revive fair competition in the telecoms sector.”

Calling the decision “unprecedented and unsupportable”, Qualcomm have declared plans to appeal to Seol’s High Court, to challenge the largest ever levied fine in South Korea.

“Qualcomm strongly disagrees with the KFTC’s announced decision,” it said in a statement.

The Mobile technology giant said that as well as file for an immediate stay of the corrective order and appeal the decision, the company will also appeal the amount of the fine and the method used to calculate it.

“The KFTC ruling will not just benefit local handset makers but other global chipset makers too, so today’s ruling from the commission seems a bit broader and stronger than that of the China’s last year,” said Jung Dong-joon, a patent lawyer at SU Intellectual Property. “Qualcomm sales accounts for about 20 percent in the Korean market and that’s a significant market for Qualcomm.”

Many of Qualcomm’s consumers, including Samsung Electronics (KRX:005930) and LG Electronics (KRX:066570), have complained that the royalties they pay are too high.

Shin has said that the ruling was not about protecting domestic companies such as Samsung and LG Electronics Inc but about improving the market competition for all players involved.

Stacy Rasgon, an analyst with Sanford C. Bernstein, believes the fine will have large consequences for Qualcomm.

“The worry is not the fine—Qualcomm has deep pockets. The worry is about potential changes to the business model. Any requirement that Qualcomm change its licensing practices could affect its approach to business in other countries.”

This isn’t the first time the South Korean anti-trust agency have given Qualcomm a fine. A $200m was also given in 2009 for abusing market dominance.