Qualcomm Inc. agreed to pay a fine of $975 million to regulators in China. The biggest corporate fine in the country’s history resolves a 14-month investigation for anti-competitive practices.
The U.S. chipmaker agreed in the settlement to lower its royalty rates on patents used in China by smartphone makers Xiaomi Technology and Huawei Technologies.
Qualcomm said in a statement Monday that “it has reached a resolution with China’s National Development and Reform Commission (NDRC) regarding the NDRC’s investigation of Qualcomm under China’s Anti-Monopoly Law (AML).”
The statement said,
Qualcomm has agreed to implement a rectification plan that modifies certain of its business practices in China and that fully satisfies the requirements of the NDRC’s order. Although Qualcomm is disappointed with the results of the investigation, it is pleased that the NDRC has reviewed and approved the Company’s rectification plan.
In September last year, a court in China fined UK pharma giant GlaxoSmithKline $490 million following a conviction for bribery.
The NDRC has launched nearly 20 antitrust investigations in the past three years into local and multinational firms.
In 2013, NDRC division chief Xu Xinyu told representatives from over 30 firms at a meeting in Beijing that they should confess to any economic crimes they may have committed. He said companies that mount a defense against NDRC accusations would face stiffer punishment.
A report said the meeting included representatives from Qualcomm, GE, Siemens, Samsung Electronics, Microsoft, Volvo, IBM Corp, Michelin, Swedish packaging giant Tetra Pak, Intel Corp, Dumex, a subsidiary of Danone, and U.S. cable equipment maker Arris Group Inc.
Qualcomm said Monday it won’t contest the NDRC’s finding of antitrust law violations.
“[The settlement] removes a significant source of uncertainly from our business and really positions our licensing group to really participate in the full growth of the wireless market in China,” Qualcomm CEO Steve Mollenkopf told Reuters. “It’s something we’re happy is over.”
Qualcomm agreed in its “rectification plan” to offer licenses to current 3G and 4G Chinese patents separately from other patents. The company said it will calculate royalties based on 65 percent of the selling price of phones sold in China rather than on the whole price.
Richard L. Cassin is the publisher and editor of the FCPA Blog. He can be contacted here