FTC vs. Qualcomm: More Than the Sum of Its Parts

Rob Enderle

One of the biggest issues I have with business and political leaders is that, increasingly, they think tactically and seemingly do stupid things. This week’s antitrust filing by the FTC against Qualcomm not only looks like the poster child for this type of action, it could become my greatest example in 2017 (though frankly I doubt it) of regulators not thinking through their actions.

Now, I’ve been through a lot of antitrust actions over the years, mostly against Microsoft, and in those cases, there were elements both in the U.S. and the EU, where competitors drove the process but ended up creating bigger problems for themselves. For instance, Netscape, Google, Oracle and Sun pushed for Microsoft to be penalized in one or both geographies. Netscape and Sun failed as companies, and Google and Oracle have faced, and will be facing, similar challenges from the EU Commission, which they largely are responsible for motivating to look at tech companies. It’s kind of the perfect example of “what goes around, comes around,” and tactically thinking that when you use government as a weapon, that weapon won’t eventually be turned on you.

This action may also turn out to have some of those elements, and all of this speaks to my long-term theme that too many leaders can’t think strategically. Let me explain.

Backstory with Qualcomm

Qualcomm is dominant in smartphone chipsets, largely as a result of spending billions over decades in the space and largely driving the industry. Its position with radios is in line with Intel’s position with PC processors, Microsoft’s with desktop operating systems, and IBM’s with mainframe computers. The FTC complaint basically argues that Qualcomm is using its dominance to create a competitive tax that competitors have to pay to Qualcomm, assuring its dominance. Being dominant isn’t illegal, but using your dominance to assure that you remain dominant would be, and governments in general don’t like the idea of sharing the ability to tax with anyone.

The leading company arguing that Qualcomm was behaving badly has, of late, been Samsung, one of the most effective companies to challenge Apple in the smartphone space.

The Players and Their Positions

Three elements bear watching here. While Apple is called out in the filing, Samsung is likely the biggest beneficiary of this action and its vice chairman and head has just been charged with bribery on a massive scale in South Korea, and should fall under the U.S. Foreign Corrupt Practices Act (this was known before the FTC action was filed). This should have auditors looking for connections between Samsung and the FTC. Second, the FTC is short two of the five members and the head of the commission’s resignation has been accepted by the incoming administration (the other member supporting this action is expected to retire soon). The incoming Trump administration has promised to put American companies first and to assure and protect their competitiveness. Third, because of the potential appearance of being politically motivated, decisions like this are typically not done during a presidential transition period. Finally, the expected head of the new commission not only voted against this action, she has written a detailed rebuttal founded on the core element of proof, or this case, the lack of it. In addition, she argues that the action would uniquely harm U.S. companies and their ability to compete in the world market.

Wrapping Up: The FCT May Be Stopped Before It Gets Started


Most argue that this FTC action will be overturned by the new administration and the strategy behind it may be to just create an event that will make Trump look like he is too pro-business. In effect, that argument is that it was never intended to restrict Qualcomm, just to hurt Trump. However, even then, throwing a big Hillary Clinton supporter, Qualcomm, under the bus would seem to be rather foolish especially if Trump comes to Qualcomm’s rescue, because then Qualcomm would possibly be a big Republican supporter in future election cycles. I think this is a perfect example of poor tactical thinking, and hope that none of us end up embroiled in it.

Rob Enderle is President and Principal Analyst of the Enderle Group, a forward-looking emerging technology advisory firm.  With over 30 years’ experience in emerging technologies, he has provided regional and global companies with guidance in how to better target customer needs; create new business opportunities; anticipate technology changes; select vendors and products; and present their products in the best possible light. Rob covers the technology industry broadly. Before founding the Enderle Group, Rob was the Senior Research Fellow for Forrester Research and the Giga Information Group, and held senior positions at IBM and ROLM. Follow Rob on Twitter @enderle, on Facebook and on Google+


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Add Comment      Leave a comment on this blog post
Jan 20, 2017 4:01 AM Darel Rex Finley Darel Rex Finley  says:
Interesting take; I just have a few questions: 1. Isn't this case about FRAND agreements (a.k.a. SEPs), and the unavoidability of using those patents once they're part of a telecom standard? Why no mention of FRAND/SEP in the whole article? 2. I don't think it's automatically illegal to use your dominance to maintain your dominance; I think it still depends on exactly how you do that. All dominant companies are, in some way or another, using their dominance to maintain their dominance. 3. What do you mean by, "governments in general don’t like the idea of sharing the ability to tax with anyone" — wouldn't the government be happy to tax an industry dominator, just as they would tax a slew of smaller firms? (Heck, might be easier.) Reply

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