Qualcomm supply policy ‘innocuous and lawful’, tribunal hears

Lawyers for technology giant Qualcomm have described its supply policy as “innocuous and lawful” as they opened their submissions at a competition tribunal.

A class action against Qualcomm that, if successful, could result in payouts for UK smartphone users, entered its second day of an expected five-week duration at the Competition Appeal Tribunal in London.

Consumer group Which? has brought the claim on behalf of around 29 million UK Apple and Samsung smartphone users.

It will focus on whether Qualcomm held market power and, if so, whether it abused its position as a dominant company.

Which? alleges Qualcomm breached UK competition law by taking advantage of its dominance in the patent-licencing and chipset markets.

It claims that this resulted in Qualcomm being able to charge manufacturers such as Apple and Samsung inflated fees for technology licences, which have then been passed on to consumers in the form of higher prices or lower-quality smartphones.

Daniel Jowell KC, for Qualcomm, told the tribunal: “You’ll recall that in the run up to this trial, on multiple occasions we have sought to tease out of the claimant what actually is the precise conduct that is said to constitute the alleged abuse.

He added: “What turns this innocuous and lawful chipset supply policy into the abusive and unlawful NLNC (No Licence No Chips). We got to the stage where it became very puzzling because no one has ever contested that Qualcomm can’t maintain both a patent licencing business and a chipset supply business. Indeed any such suggestion would be rather absurd.

He went on: “That left it very unclear to us what alternative conduct or business model the CR (class representative) proposed that Qualcomm could and would have adopted instead of the CSP (Chipset Supply Practice) in order for Qualcomm to comply with competition law.”

And he told the tribunal: “If the essence, or if you like the hallmark, of the abusive conduct is the effective dictation of terms, you just don’t find it in the evidence.”

On Monday, Philip Moser KC, for Which?, told the hearing: “The nature of the abuse, where the abuse manifests itself, is in the area of negotiation of the royalty.

“And Qualcomm, instead of competitive negotiation, uses the inherent risk, or sometimes explicitly stated threat, of chipset supply disruption, software delay, to foreclose a normal discussion of royalties, and conditions for the licences.

“Instead, it’s ‘unless you take our package of licences at Qualcomm’s rate and on our terms, unless you do that there are no chips’.

“And Qualcomm’s terms include a royalty at a rate which we say is likely to be inflated. And that’s payable on every phone whether it uses Qualcomm’s chips or not.”

If Which?’s first trial is successful, there will then be a second trial focusing on Qualcomm’s conduct and the damage suffered by the class, that Which? has calculated at around £480 million.

Which? is seeking damages for all affected Apple and Samsung smartphones purchased between October 1 2015 and January 9 2024.

It estimates that individual consumers could be due an average of around £17 per phone if the action is successful.

Which? said the action was “vital” to obtain redress for consumers and to “send a clear message to powerful companies like Qualcomm that if they engage in harmful, anticompetitive practices, Which? stands ready to take action”.

Which? chief executive Anabel Hoult said: “This trial is a huge moment. It shows how the power of consumers – backed by Which? – can be used to hold the biggest companies to account if they abuse their dominant position.

“Without Which? bringing this claim on behalf of millions of affected UK consumers, it would simply not be realistic for people to seek damages from the company on an individual basis – that’s why it’s so important that consumers can come together and claim the redress they are entitled to.”