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South Korea’s Supreme Court vacates 2009 antitrust fine imposed on Qualcomm by the Korea Fair Trade Commission: unrelated to 2016 ruling

South Korea’s leading news agency, Yonhap, just reported on a decision by South Korea’s Supreme Court relating to a decision the Korea Fair Trade Commission (KFTC) made almost ten years ago: a 273.2 billion won ($243 million) antitrust fine on Qualcomm for one particular type of conduct has been vacated, requiring a new decision by a lower court.

This appellate decision is unrelated to the much bigger (1.03 trillion won = presently almost $950 million) fine imposed on Qualcomm by the KFTC in December 2016. That one will take many years before it reaches the Supreme Court.

So let’s put all of this into perspective. The old 2009 matter, which apparently took almost a decade to make its way up to South Korea’s top court, was about incentive payments by Qualcomm “to Samsung Electronics Co. and LG Electronics Inc. between 2000 and 2009 on condition that they only use Qualcomm chips for certain smartphone models” (quoting Yonhap). That decision was affirmed by the Seoul High Court in 2013 for its anticompetitive effect. According to Yonhap, the Seoul High Court determined the incentive payments “effectively forced Korean buyers [= Samsung and LG] from exploring other deals with [Qualcomm’s] competitors,” and the Seoul High Court took particular issue with some of what was paid to LG because it “undermined fair competition.”

Today, however, South Korea’s Supreme Court determined that LG’s share in the (presumably Korean) smartphone market in the years 2006-2008 was “well below the 40 percent level,” which in the top court’s opinion makes it “less likely” that these exclusive dealings had anticompetitive effects.

So what’s the actual impact of this decision to vacate the 2009 fine, apart from being unrelated to the 2016 case (in which the fee is almost four times as high)?

My interpretation of Yonhap’s report is that a limited adjustment amounting to tens of millions of dollars is somewhat likely, but large parts of the $243 million fine presumably won’t be affected. I believe this adjustment will have limited impact on the number because

  • Samsung is clearly bigger than LG (the fine related to Qualcomm’s payments to Samsung and LG), and

  • the appeal succeeded with respect to only a subset of the period the fine relates to (the fine was for 2000-2009, while the Supreme Court’s decision to vacate is based on a market share determination for 2006-2008, i.e., only about a third of the period at issue).

What could be the case is that the KFTC fined Qualcomm particularly hard for the LG deal (should it have taken even more issue with the terms of that deal than with the terms of Qualcomm’s deal with Samsung). So maybe the adjustment will be greater than tens of millions of dollars. But even if, hypothetically speaking, half of the 2009 fine was overturned, it would only amount to about 10% of the total of the 2009 and 2016 rulings.

LG recently became a party to the appellate proceedings related to the 2016 matter. Samsung used to be a party to the proceedings relating to the 2016 decision, but dropped out after effectively settling its dispute with Qualcomm throuhg a new commercial deal in 2018 that involved not only patent licenses but also the use of Samsung’s foundry by Qualcomm.

Testimony from Samsung and LG, and documents referring to Samsung and LG, also played a role in last month’s U.S. antitrust trial (Federal Trade Commission v. Qualcomm) in San Jose.

At the end of the Northern California trial, Judge Koh indicated that her ruling would take more time than her decisions usually do (there’s probably no faster federal judge than her). With a view to another potential government shutdown (which may happen after this week), FTC staff inquired about whether they should keep some members of the litigation team available in order to respond to a ruling during the shutdown. Judge Koh then ruled out that a decision would come down before February 15 (after which date government funding might be interupted again) and invited the FTC to inquire again shortly before February 15. But Judge Koh also noted that the next shutdown would also affect her court. I guess we’ll see an FTC filing with Judge Koh’s court in a couple of days, and then Judge Koh may provide some indication of a likely ruling date. A delay of the decision in the FTC case would potentially affect the Apple et al. v. Qualcomm trial scheduled to go to trial on April 15 in San Diego (Southern District of California), as some of the issues to be decided by Judge Koh are relevant to Judge Curiel’s case.

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