The Truth Why Apple Sued Qualcomm

By Trian Gulum Tolstoy | Jan 24, 2017 05:06 AM EST
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Qualcomm Inc, the chip supplier for Apple, is in a sticky situation right now considering that Apple just filed a $1 billion lawsuit against the company last Friday. Apple filed the lawsuit days after the U.S. government accused Qualcomm Inc of anticompetitive tactics in order to maintain monopoly over key semiconductors in mobile phones.

Qualcomm is a major supplier of both Apple and Samsung's "modem" chips, a chip that connects phones to wireless networks. Qualcomm's $23.5 billion in revenue in its most recent fiscal year was accounted together by the two companies.

The lawsuit filed in San Diego federal court was followed by a complaint earlier this week according to USA Today. The suit, filed in California federal court, said Qualcomm threatened to disrupt cell phone makers supplies of the chips it held patents for, called baseband processors, unless the companies paid elevated royalties according to USA Today. Apple accused Qualcomm of overcharging the chips and then proceeds to not pay $1 billion in promised rebates. Apple also said that Qualcomm withheld the rebates after Apple's talk with the Korea Fair Trade Commision, the South Korea's antitrust regulator.

"If that were not enough, Qualcomm then attempted to extort Apple into changing its responses and providing false information to the KFTC in exchange for Qualcomm's release of those payments to Apple. Apple refused," Apple said in its lawsuit.

According to an article on Reuters, Qualcomm General Counsel Don Rosenberg called Apple's claims "baseless." "Apple has been actively encouraging regulatory attacks on Qualcomm's business in various jurisdictions around the world, as reflected in the recent KFTC decision and FTC complaint, by misrepresenting facts and withholding information," Rosenberg said in the statement.

"We welcome the opportunity to have these meritless claims heard in court where we will be entitled to full discovery of Apple's practices and a robust examination of the merits."

Qualcomm shares (QCOM) ended 2.4% lower Friday, adding to losses that followed the FTC complaint. Apple shares (AAPL) ended 0.2% higher.

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