Published in Processors

FTC certain to get cold feet on Apple complaint

by on27 January 2017


Jobs’ Mob must go to court

It is starting to look like the FTC’s much publicised legal case against Qualcomm at the insistence of Apple is not going to go anywhere.

The fruity cargo-cult hit on a wizard wheeze to try and get Qualcomm to give it significant price cuts on its licensing by complaining to the FTC and suing the chipmaker for a random billion dollars.

Apple appears to have thought that with Qualcomm getting into hot water in China and Korea for over charging on its licences, it could bully the company into cutting the cost of its licences too. It made a complaint to the FTC which promised to sue.

However, as we pointed out earlier this week, US President Donald (Prince of Orange) Trump named FTC Commissioner Maureen Ohlhausen to head the regulatory agency. Ohlhausen had vigorously opposed the FTC's lawsuit.

Ohlhausen broke her usual practice of not commenting on her dissenting votes, saying the lawsuit was "based on a flawed legal theory ... that lacks economic and evidentiary support" and "fails to allege that Qualcomm charges more than a reasonable royalty".

Analysts are now starting to agree with us that the new FTC commissioner is almost certain to abandon the case – a fact which was almost certain to be known when the Tame Apple Press announced that the FTC was suing.

Morgan Stanley analyst James Faucette told investors that if the FTC abandons its case, it certainly would not be helpful to Apple and Jobs’ Mob must push the issue by itself.

The case is not that certain. Although the Korean Fair Trade Commission investigation into the San Diego-based chip resulted in a $853 million fine Qualcomm’s business model was not actually challenged. The same applied to China where Qualcomm was fined $975 million in 2015.

Apple’s cunning plan appears to be attempting to bring down Qualcomm's full-device royalty model. It attempted to give Qualcomm a warning by using Intel modems on half of its iPhones. But was left in the slightly embarrassing position that Intel modems were not as good. This left legal action to force Qualcomm to give it better discounts.

But its argument is looking decidedly flaky. It claims that Qualcomm withheld $1 billion in rebates and other payments owed to Apple.

But in court documents it claimed that Qualcomm was a patent troll and charging royalties for technologies they have nothing to do with. Coming from the company which wanted all Samsung’s profits for stealing its invention of the rounded rectangle that is rich.

On its earnings call on Wednesday, Qualcomm said it would defend its business model in courts around the world. Qualcomm President Derek Aberle said there had been no sudden change in the law to make this practice improper, and it remains the most efficient and fair method of licensing.

Last modified on 27 January 2017
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