Qualcomm slapped down by US court for exploiting its chip monopoly to 'strangle competition'

The chipmaker Qualcomm illegally suppressed competition for smartphone components by threatening to cut off its customers to extract "unreasonable" fees, a US judge has ruled.

The court in San Jose, California, found that Qualcomm's licencing practices had "strangled competition" through its monopoly power in modem chips, hurting both rivals and consumers.

Shares dropped by 11pc on Wednesday after Judge Lucy Koh ordered Qualcomm to renegotiate its licencing agreements at reasonable prices, without any threats, and to submit to monitoring for seven years.

The ruling is a victory for the US Federal Trade Commission (FTC), which had accused Qualcomm in 2017 of violating antitrust law, and appears to be a vindication of Apple, which settled its sprawling legal battle with Qualcomm over similar accusations last month.

"Qualcomm's licencing practices have strangled competition in the [smartphone modem] chip markets for years, and harmed rivals, manufacturers and end consumers in the process," said Judge Koh.

"Its own documents show that it knew its licensing practices could lead to antitrust liability  and knew its licensing practices harm competition, yet continued anyway."

Qualcomm announced that it would immediately appeal the decision, with general counsel Don Rosenberg saying: “We strongly disagree with the judge’s conclusions, her interpretation of the facts and her application of the law."

At the heart of the case was Qualcomm's market dominance and its practice of signing exclusivity deals with phone makers which forced them to use only Qualcomm chips in return for discounts and incentives – a practice for which it was find €997m (£877m) by the European Union last year.

Judge Koh said that Qualcomm had exploited this power to destroy competing technology standards, starve rivals of the resources to develop their own technology and denied them the ability to ever enter the market by blocking them off from the biggest customers.

When Apple's dispute with Qualcomm began, it was forced to use chips made by Intel instead, delaying its ability to launch 5G phones. When the dispute was settled, Intel announced that it was shutting down its mobile chip division.