In a major case before the U.S. International Trade Commission, Qualcomm is trying to get the ITC to protect it from market competition. While Qualcomm claims the issue is about property rights, a closer look shows that is not the issue. The ITC ought not be in the business of economic protectionism. The implications extend far past this one case; it has the potential to set a dangerous precedent that would encourage other companies to go to the ITC to protect themselves from competition.
The R Street Institute recently filed comments with the ITC, supporting its application of public interest considerations to reject Qualcomm’s bid for an overbroad exclusion order in the cell phone market. The comments were cosigned by the Electronic Frontier Foundation, Engine Advocacy and Lincoln Network.
In an administrative action titled Certain Mobile Electronic Devices, Qualcomm had petitioned the ITC to prevent importation of several Apple iPhones under the agency’s power to issue exclusion orders banning importation of articles that infringe patents. That power makes a lot of sense in some situations—when a shady foreign company is dumping infringing products into the United States and can’t be brought to court, the trade remedies at the disposal of the ITC can be appropriate.
But that’s most definitely not the case with Qualcomm and Apple, both major U.S. companies. Indeed, Qualcomm doesn’t seem especially interested in Apple at all. Instead, the chip manufacturer’s goal, as is apparent in the evidence (see pages 190-197) revealed during the investigation, is to boot out its only other competitor in the market: Intel.
“The bottom line for me is that I see the Staff’s recommended tailored exclusion order as being a guarantee: (1) of a Qualcomm monopoly; (2) of harm to everyone (especially the economy of the United States) involved but Qualcomm; and (3) of harm to the National Security of the United States,” writes ITC Administrative Law Judge Thomas Pender.
Qualcomm and Intel are the only two producers of high-end baseband processors (the chips that allow cell phones to communicate with towers), and Apple is Intel’s main buyer. Shutting down Apple’s domestic iPhone business would create ripple effects that would essentially put Intel out of the baseband processor business.
As Judge Pender realized and as we explain in our comments, the ultimate result of an ITC exclusion order—the entrenchment of Qualcomm as the sole monopoly supplier of baseband processor chips—would be incredibly harmful to the economy and to key national interests. Cell phones are critical to consumers today, given the importance of Internet access, and a monopoly in the supply chain would raise prices, slow down innovation and undermine the national goal of expanding broadband Internet access. And given the importance of mobile infrastructure to cybersecurity, a lack of competition could lead to widespread vulnerabilities that would threaten the safety and security of all Americans.
The ITC will now reconsider whether to heed the administrative law judge’s determination that the threats to competition, consumers and national security are serious enough to forgo an agency action that would create a Qualcomm monopoly. We hope that the agency will recognize the gravity and breadth of these important issues as it reaches its decision.
Image credit: GaudiLab