After China, Qualcomm now under US, EU regulatory probe

Qualcomm Inc, the world's biggest supplier of chips for mobile phones, which is already under a anti-monopoly probe in China, yesterday revealed that it is now facing US and European regulatory investigations.

Qualcomm said that the US Federal Trade Commission (FTC) launched an investigation in September over breaching its patent licensing agreements.

In a filing, Qualcomm said that the FTC has launched an investigation into the company's ''potential breach of FRAND commitments.''

FRAND is a legal term that stands for "Fair, Reasonable, and Non-Discriminatory" terms and is typically used to describe patent licensing terms. It is normal for companies to have to agree to licensing a patent in FRAND terms before it will be accepted to become part of a standards body approved technical standard.

Under FRAND, a patent holder has to license its essential patents to others and even its competitors on mutually agreed fees.

Qualcomm also said it is facing a new probe launched by the European Commission in October on rebates and other financial incentives in the sale of its chips.

Both investigations could lead to fines on the company, or restrict its business, the company said.

Since the past year, Chinese antitrust regulator China National Development and Reform Commission (NDRC) has been probing whether Qualcomm overcharges clients on chipsets and royalty fees for its patents (See: Qualcomm faulted by China body for overcharging, dominance abuse).

The NDRC is also investigating whether Qualcomm has refused to grant patent licenses to local chip makers.

If found guilty, Qualcomm will have to pay a hefty fine of $1 billion or more, and also change its royalty-fee structure.

Qualcomm also said that a few Chinese phone makers are not reporting hundreds of millions in cellphone unit sales to avoid royalty payments, which will hurt its bottom line.

"Certain licensees in China currently are not fully complying with their contractual obligations to report their sales of licensed products to us (which includes certain licensees underreporting a portion of their 3G/4G device sales and a dispute with a licensee), Qualcomm said in a statement.