South Korea's anti-trust agency on Thursday imposed a $208 million fine on Qualcomm Inc and ordered the U.S. wireless chip and technology company to stop discriminating against companies using competitor's products.
The Korean Fair Trade Commission (KFTC) ruling deals a blow to Qualcomm, which counts Korean mobile phone makers Samsung Electronics Co Ltd and LG Electronics Inc -- the world's No.2 and No.3 respectively -- as its major clients.
Qualcomm said it deeply regretted the decision and warned that the decision could hurt the competitiveness of Korean mobile phone makers.
There has been no illegal activity, Qualcomm Korea head Cha Young-koo told reporters, adding that Qualcomm planned to appeal if the final statement, to be published in the next few months, maintained the fine.
The KFTC, which had been investigating the case for more than three years, said in a statement that Qualcomm abused its dominant position in the local market for code division multiple access (CDMA) mobile phone chips.
Qualcomm held a 99.4 percent share of that market in 2008.
When licensing its CDMA mobile technology, Qualcomm levied higher royalties on companies that used modem chips supplied by rival companies, the commission said.
Qualcomm also provided clients with rebates for using its own chips, it said, adding that anti-competitive business practices helped the U.S. company maintain its near monopoly for more than 10 years in South Korea.
Qualcomm, which competes with Texas Instruments Inc and others in the market for cellphone chips, has also been under investigation by the European Commission in Brussels for anti-competitive behavior.
Qualcomm said the difference in royalties and other types of incentives were part of marketing and based on agreements with Korean clients.
The fine of 260 billion won ($208 million) is the largest the KFTC has issued against a single company.
South Korean media reports estimated Qualcomm's annual revenue from Korean makers at 2.5 trillion to 3 trillion won. Qualcomm said on Wednesday it expected fiscal year 2009 revenue at $10.25 billion to $10.45 billion.
Analysts said the regulator's ruling was unlikely to have an immediate impact as handset makers usually have long-term contracts with Qualcomm.
They said there was no viable alternative to Qualcomm for companies such as Samsung and LG, who rely heavily on Qualcomm's technology for key mobile phone standards such as CDMA 2000 and W-CDMA.
(Reporting by Rhee So-eui and Shin Jieun; Editing by Jacqueline Wong and Chris Lewis)