By Peter Reap, J.D., LL.M.
In the action alleging that Qualcomm’s licensing practices violated the antitrust laws, the Justice Department’s Antitrust Division suggests that if the court finds liability on any of the FTC’s claims, additional briefing should be ordered and a hearing held on remedy issues.
The Department of Justice’s Antitrust Division’s Statement of Interest in the FTC’s action against Qualcomm contends that if the court does find liability on any of the FTC’s claims, additional briefing should be ordered and a hearing held on issues related to a remedy. In fashioning any remedy, the court should carefully consider all relevant issues and effects of any remedy, including the principle that, although a proper remedy must restore any competition lost due to actions found to have violated the antitrust laws, a remedy should work as little injury as possible to other public policies. The government emphasized that it takes no position at this time on the underlying merits of the FTC’s claims or on any other issues related to the pending determination of liability (FTC v. Qualcomm, Case No. 5-17-cv-00220-LHK, FTC File No. 141 0199).
FTC action. In January 2017, the FTC filed its charges in the federal district court in San Jose, California, alleging that Qualcomm violated federal antitrust laws by unfairly leveraging its power in the modem chips market. A bench trial was held earlier this year.
The agency is seeking injunctive relief to undo and prevent the company’s "unfair methods of competition." According to the FTC, Qualcomm voluntarily committed to the two U.S. telecommunications industry "standard setting organizations"—the Telecommunications Industry Association and the Alliance for Telecommunications Industry Solutions—that Qualcomm would grant licenses for the company’s standard essential patents on fair, reasonable, and non-discriminatory terms to applicants wishing to implement cellular standards. Among other things, the FTC contends that Qualcomm has breached these contractual commitments and that the company rejected requests from modem-chip competitors to license patents essential to practicing these standards. The FTC complaint specifically addressed exclusive dealing arrangements between Qualcomm and Apple.
Statement of Interest. Holding a hearing on the appropriate remedy is vital in monopolization cases because the obligations courts impose often have far-reaching effects and can re-shape entire industries, according to the Antitrust Division’s Statement of Interest. As one previous head of the Antitrust Division put it, "Section 2 remedies should not crush a tiger’s spirit; they should train, not tame. Among other things, this means that equitable remedies should not interfere with the defendant’s innovation incentives going forward."
The effects of an antitrust remedy, however, are not always intended; if overly broad, a remedy ultimately may cause harm to competition and consumers, the government warned. In this case, there is a plausible chance that an overly broad remedy could reduce competition and innovation in markets for 5G technology and downstream applications that rely on that technology. It has the distinct potential to harm rather than help competition.
Because antitrust relief is equitable in nature, a court must take into account public and private concerns beyond competition in crafting a remedy. In United States v. E. I. du Pont de Nemours & Co., the Supreme Court explained that a court in fashioning an antitrust remedy must be guided by "three dominant influences": (1) "[t]he duty of giving complete and efficacious effect to the prohibitions of the statute;" (2) "the accomplishing of this result with as little injury as possible to the interest of the general public;" and (3) "a proper regard for the vast interests of private property." 366 U.S. 316, 327-8 (1961).
Because of the potential of an overly broad remedy to reduce innovation and harm American consumers, the court should hold a hearing and order additional briefing to determine a proper remedy that both protects competition and effects minimal harm to public and private interest, the Antitrust Division counsels.
This case is No. 5:17-cv-00220-LHK.
Attorneys: Geoffrey M. Green for the FTC. Richard J. Stark (Cravath, Swaine and Moore LLP) and Robert Addy Van Nest (Keker, Van Nest & Peters LLP) for Qualcomm Inc. Jason C. Lo (Gibson, Dunn & Crutcher LLP) for Wistron Corp.
Companies: Qualcomm Inc.; Wistron Corp.
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