Many people have accused many large technology companies of being monopolies over the decades. Twenty years ago, Microsoft was arguably a monopoly. However, antitrust lawsuits against large technology companies have been few and far between. The courts tend to decide that these companies do give others a passably fair chance to compete with them.
This year, one tech giant does not seem likely to get away with its dominance of the market. Qualcomm, a supplier of chips for cell phones, is on its way to being defeated in court, having used unlawfully severe means to keep competitors out of the market. In 2005, the contract that Qualcomm gave to apple as a chip supplier was intended to prevent competitors from supplying chips to apple. Even back in 2005, Qualcomm had a strong enough position in the market that it could insist on such outrageous contracts. The federal trade commission’s lawsuit against Qualcomm, which began in 2017, was initiated with the support of Apple. For a decade, Apple had been losing money as a result of the severity of Qualcomm’s contracts and the lack of capable competitors.
Luch Koh, a California federal judge, has recently given the FTC a document hundreds of pages in length, full of evidence that Qualcomm’s practices are severe enough to violate antitrust laws. For twenty years, Qualcomm unethically minimized the possibility of competition and used its market dominance to charge high prices for its smartphone parts. Cellphone manufacturers were threatened with immediate loss of business if they tried to bend the rules of Qualcomm’s contracts. Instead of merely selling chips, Qualcomm sold enormously expensive licenses to anyone who wanted to use their technology. While many patent holders sell licensing fees for their patents, Qualcomm charged notoriously high prices to all of the major cell phone companies.
Qualcomm is not entirely yet legally defeated – the case must go through an appeals process – but experts doubt that Qualcomm has a chance of winning. The company will have to re-negotiate all of its contracts on much more reasonable terms. Qualcomm will no longer be able to threaten to cut companies off of the new technology. If Qualcomm is defeated, competition is likely to drive down cell phone prices.
The cost of developing new cellular chips that are ahead of the technological curve is enormous. A new chip can cost hundreds of millions of dollars to create. Qualcomm also discouraged companies from using chips made by any other manufacturer, further reducing the possibility of a strong competitor appearing. Qualcomm knew that it could use its patent licensing fees to undercut competitors prices. Only if a competitor were to have convinced most of the major companies to switch to their technology all at once could Qualcomm have been defeated. Without any new competitor being able to beat Qualcomm at a rigged game, the only solution was legal action.
The decisive act that brought legal action against Qualcomm was Qualcomm’s decision to lash out at Apple for using chips manufactured by Intel as well as Qualcomm. After Apple chose to use a mix of chips produced by two different companies, Qualcomm did whatever it could to weaken Apple relative to other cell phone manufacturers. While Apple was able to succeed at selling phones made with only Intel technology, there was the risk that Qualcomm could beat Intel to a significant technological leap and that Apple would be unable to purchase up to date chips anywhere. A corporate war with Apple and Intel seems to have been more than what Qualcomm would get away with, and the legal case that began in 2017 appears to be well on its way to ending in Qualcomm’s defeat.