Speaker 1: Welcome to the Bloomberg Law Podcast. I'm June Grosso. Every
Speaker 1: day we bring you inside and analysis into the most
Speaker 1: important legal news of the day. You can find more
Speaker 1: episodes of the Bloomberg Law Podcast on Apple podcast, SoundCloud
Speaker 1: and on Bloomberg dot com slash podcast. This week, Pocom
Speaker 1: was found two d seventy two million dollars by EU
Speaker 1: antitrust regulators for predatory pricing that pales in comparison to
Speaker 1: the one point one billion dollar find the EU imposed
Speaker 1: last year on the chip maker. Of course, Qualcom is
Speaker 1: appealing both rulings, just as it's appealing a decision by
Speaker 1: a federal judge in San Francisco which would force the
Speaker 1: chip maker to change its practices. In an unusual twist,
Speaker 1: the Justice Department is now arguing against the Federal Trade Commission,
Speaker 1: which brought the case, So joining me to help us
Speaker 1: sort this all out. As Spencer Waller, professor of anti
Speaker 1: trust law at the Loyola University School of Law, so,
Speaker 1: Federal Judge Lucy co issued a sweeping, two three page
Speaker 1: opinion that Qualcom had strangled competition for years. What remedy
Speaker 1: did she order? So this case relates to the way
Speaker 1: they license and sell their chips for what we would
Speaker 1: call three G and four G smartphones. And so the
Speaker 1: judge found that Qualcom monopolized and attempted to monopolize various
Speaker 1: aspects of the chip market in terms of the way
Speaker 1: it licenses technology, the way it refused to sell chips
Speaker 1: or license to rival chip makers, and the way it
Speaker 1: provided certain discounts to clients to sort of lockout competition.
Speaker 1: What's controversial about her remedy is she found that this
Speaker 1: was all illegal. She enjoyed the specific business behavior that
Speaker 1: was illegal, but because it related to the old technology
Speaker 1: three G and four G, she extended her injunction to
Speaker 1: the ongoing sales and licensing of the five G technology.
Speaker 1: So Qualcom basically passed to the license technology to rival
Speaker 1: chip makers. It has to live up to its promises
Speaker 1: to license all comers on fair, reasonable and nondiscriminatory terms,
Speaker 1: and it has to avoid certain exclusive dealing arrangements and
Speaker 1: certain sweetheart deals. So the Trump administration interfered even before
Speaker 1: the judge's decision, asking her to consider limiting any penalties.
Speaker 1: Now it's interfering again at the appellate stage. How unusual
Speaker 1: is that it's not unprecedented, but it's highly unusual the
Speaker 1: two agencies. This case was brought by the FTC that
Speaker 1: as an independent agency with five commissioners appointed by the
Speaker 1: President confirmed by the Senate, and the two agencies operate independently,
Speaker 1: although they generally go out of their way to not
Speaker 1: interfere with each other and generally not duplicate each other's efforts.
Speaker 1: This is a rare, not completely unprecedented. This is the
Speaker 1: most aggressive I've ever seen the d o J jumping
Speaker 1: into an FTC case. Judge co refused to put her
Speaker 1: ruling on hold while Qualcom appeals, so the chip makers
Speaker 1: asking the Ninth Circuit to do that, and the Justice
Speaker 1: Department is backing Qualcom, saying the case threatens national security.
Speaker 1: How So, the Justice Department's position is that essentially Qualcom
Speaker 1: is the most important maker of five G modem chips
Speaker 1: and the related technology, and it's vital for national security
Speaker 1: and energy policy, and the remedies should be limited so
Speaker 1: as not to interfere with their innovation and the rollout
Speaker 1: of five G secure technology. Is that an unusual position
Speaker 1: to take? I know that last year the Trump administration
Speaker 1: blocked a hostile takeover bid from rival chip maker Broadcom.
Speaker 1: Is it unusual to be so protective of a company
Speaker 1: like this. Well, there's two separate things. There's the antitrust review,
Speaker 1: which is generally limited to what is the likely harm
Speaker 1: to competition and for certain deals, there's a separate review
Speaker 1: for national security and qual acquisition was blocked on national
Speaker 1: security grounds. This is the first time I can think
Speaker 1: of that the Justice Department has ever gone into court
Speaker 1: to argue that an otherwise antitrust violation should be remedied
Speaker 1: in limited ways because it also threatens national security. The
Speaker 1: Antitrust Division has really always taken the decision that all
Speaker 1: they do is antitrust. All they do is analyze effects
Speaker 1: on competition, and this is a very different and important
Speaker 1: and troubling step for them to jump in in this
Speaker 1: particular way. It's also very troubling because right now the
Speaker 1: technical issue is just whether the District cart judges order
Speaker 1: should be stayed, But in doing so, the Justice Departments
Speaker 1: partially arguing that the STC is not likely to prevail
Speaker 1: on appeal. So they're really signaling to the court that
Speaker 1: one agency believes that the case is no good and
Speaker 1: the other agency just one the case below. How is
Speaker 1: her order as far as you're concerned, do you think
Speaker 1: it will be subject to reversal by the Nine Circuit? Oh,
Speaker 1: it's a long and complicated opinion. Much of it turns
Speaker 1: on on the facts, and you know the credibility of witnesses.
Speaker 1: All I can say is it's hard for me to
Speaker 1: predict what the Ninth Circuit says. I think if this
Speaker 1: case gets in front of the Supreme Court, the FTC
Speaker 1: will have some uphill slating. Supreme Court has been very
Speaker 1: narrow in its views of Section two of the Sherman
Speaker 1: Act about what is and is not monopolization. You mentioned
Speaker 1: what's going on in the EU. Their law is more expansive,
Speaker 1: it covers more things, They have better theories, and they
Speaker 1: have different remedies, including fines, and so the EU stuff
Speaker 1: is on pretty firm ground, and at least the U
Speaker 1: S stuff is subject to debate. Although I find the
Speaker 1: FTC case credible and based on existing law, including when
Speaker 1: you pledge to a trade association or a standard setting
Speaker 1: body that you're gonna license things in a certain way.
Speaker 1: If they adopt your technology, you're to stick with that.
Speaker 1: I want to ask you about the FTCs argument in
Speaker 1: their argument opposing Qualcoms intervention. Here it says that the
Speaker 1: argument that an anti trust remedy that reduces Qualcoms profits
Speaker 1: constitutes an impermissible threat to national security would imply that
Speaker 1: Qualcom is immune from antitrust scrutiny. Do you agree with that?
Speaker 1: Does it go that far? Well, I mean, you know,
Speaker 1: the agencies are starting to throw some sharp alpos at
Speaker 1: each other. I agree with the stec's position on this.
Speaker 1: This has come up many other times. For example, when
Speaker 1: a T and T was being broken up, the antitrust
Speaker 1: concerns prevailed over certain parts of the government who thought
Speaker 1: that this would be bad for national security. This is
Speaker 1: an antitrust case. There are other ways to pursue the
Speaker 1: national security concerns. Well. Anti trust is becoming very much
Speaker 1: a part of the conversation today, and certainly Qualcom is
Speaker 1: keeping a lot of anti trust lawyers in business. Thanks
Speaker 1: so much for joining us. That Spencer while or he's
Speaker 1: a professor of antitrust law at the Loyola University School
Speaker 1: of Law. Thanks for listening to the Bloomberg Law Podcast.
Speaker 1: You can subscribe and listen to the show on Apple Podcasts, SoundCloud,
Speaker 1: and on Bloomberg dot Com. Slash podcast. I'm June Rosso.
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