The Supreme Court ruled that the Fair Trade Commission should cancel some of the 273.2 billion won penalty imposed on Qualcomm for discriminatory royalties and conditional rebates in 2009.
On 11th, the Supreme Court 1st Department (Main Judge Gi-Taek Lee Supreme Court Judge) decided that the Fair Trade Commission rightfully imposed a fine on Qualcomm's abuse of a dominant position in an appeal filed by Qualcomm against the Fair Trade Commission for corrective orders and penalty imposition revocation. The Court, however, proclaimed that it remanded after reversal the disposition of fines for radio frequency (RF) chip conditional rebate provision.
The Court decided that because LG Electronics' market share of CDMA2000 type cell phones from 2006 to 2008 was only 21.6%~25.9% while Qualcomm's RF chip market share had continued to decline during this period, it was difficult to confirm that there was a fear of restricting competition due to the act of providing rebates or that unfairness could be recognized. Previously, the Seoul High Court ruled that Qualcomm had at least a 40% market share in the RF chip market. It determined that the fact that the business with such a high market share was providing a rebate while monopolizing the products itself qualified as the market containment and was in violation of the fair trade laws.
The Supreme Court ruled that the penalties of 273.2 billion won were legitimate except for the part related to RF chips. The Court did not accept Qualcomm's remaining claims by saying that the provision of conditional rebates and discriminatory royalties on modem chips was a misuse of the market-dominant business operator status.
The Fair Trade Commission is discussing whether to levy penalties for the purposes of the ruling or to go to the Seoul High Court to dispute the amount of the penalty. In the penalty of 273.2 billion won, the RF chip conditional rebate in relation to LG Electronics was not recognized. The remaining penalty amount excluding the above amount is yet to be resolved.
The case was triggered by the Fair Trade Commission's decision that Qualcomm offered discriminatory royalty and conditional rebates to its phone makers on the condition that they purchase a certain amount of modem chips and RF chips from Qualcomm from 1999 to 2009. In 2009, the Fair Trade Commission imposed a penalty of 273.2 billion won, against which Qualcomm filed the lawsuit.
The Fair Trade Commission imposed a fine of 1.30 trillion won in December 2016, claiming that Qualcomm had abused the essential mobile telecommunication standard patents. The case is under the second trial at the Seoul High Court.
Below is the Supreme Court’s decision.
2013Do14726 Cancellation Request for Corrective Measures
1 Dept. (Na) Decision Date: 2019. 1. 31.
· The plaintiffs' companies (plaintiffs 1, 2, and 3) offered royalty rebates as an exclusion condition and concurrently discounted standard technology fees to sell modems to Samsung Electronics and LG Electronics, cell phone makers. The issue at hand is whether this act qualifies as an abuse of market dominance and is an unfair exclusionary conditional transaction.
· Original trial: Plaintiff 1 has lost, Plaintiffs 2 and 3 have won the lawsuit.
Questions at issue
· Requirements to establish exclusionary conditional transaction and recognition of unfairness
· Legality of the corrective action and penalty disposition