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South Korea Authorities Investigating Qualcomm Inc.

Qualcomm Inc. said that South Korean authorities are investigating the company.

The news, announced late Nov. 17, sent Qualcomm (Nasdaq: QCOM) shares down by 9 percent by the middle of the trading day Nov. 18.

The Korea Fair Trade Commission is conducting the investigation. Qualcomm said the process will take some time to work through.

Qualcomm said a South Korean examiner’s report “alleges, among other things, that we do not properly negotiate aspects of our licenses, and that our practice of licensing our patents only at the device level and requiring that our chip customers be licensed to our intellectual property violate Korean competition law. The ER [examiner’s report] proposes remedies including modifications to certain business practices and monetary penalties.

“The allegations and conclusions contained in the ER are not supported by the facts and are a serious misapplication of law,” Qualcomm said. “Our patent licensing practices, which we and other patent owners have maintained for almost two decades, and which have facilitated the growth of the mobile communications industry in Korea and elsewhere, are lawful and pro-competitive. …

“We intend to vigorously defend ourselves at the commission hearings and remain hopeful that the commission will reject the conclusions of the examiner’s report.”

South Korea has been a market that has embraced the most advanced Qualcomm wireless communication technology. South Korean carriers frequently bring it to market earlier than U.S. carriers.

In February, Qualcomm concluded a 14-month investigation of anticompetitive practices in China. It paid Chinese regulators a $975 million fine and agreed to renegotiate license agreements with Chinese customers. Some Chinese customers have refused to pay Qualcomm as their licenses are being renegotiated.

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