WASHINGTON-The Department of Justice reported Qualcomm Inc. and Flarion Technologies Inc. have agreed to pay a $1.8 million in civil penalties for violating “pre-merger waiting period requirements” associated with Qualcomm’s $600 million acquisition of Flarion.
According to the complaint, Qualcomm obtained operational control over Flarion without observing the pre-merger waiting period requirement in violation of antitrust laws. The merger agreement required Flarion to seek Qualcomm’s consent before undertaking certain basic business activities, such as making new proposals to customers. Flarion also sought and followed Qualcomm’s guidance before undertaking routine activities, including hiring consultants and employees.
“Merging parties must continue to operate independently until the end of the premerger waiting period,” noted Thomas Barnett, assistant attorney general in charge of the DoJ’s Antitrust Division. “The Antitrust Division will vigorously enforce this requirement against any company that assumes operational control of a business that it is acquiring.”
Qualcomm pointed out in a press release that while the company agreed to pay $1.8 million to settle the case, the judgment contains no finding or admission of wrongdoing by Qualcomm or Flarion.
“With the successful integration of Flarion well under way, we decided to put this matter behind us to avoid diverting or distracting the Qualcomm-Flarion team from the important tasks of integrating the best of both companies’ technologies and refining our joint roadmap,” said Louis Lupin, senior vice president and general counsel for Qualcomm.
Qualcomm also noted that during a review of the acquisition transaction, “Qualcomm and Flarion called the DOJ’s attention to provisions of the acquisition agreement that required Flarion, in the period before the closing, to obtain Qualcomm’s consent to enter into certain types of intellectual property licenses and other agreements, and to make certain types of customer proposals. Qualcomm and Flarion voluntarily modified some of the provisions to eliminate or reduce the consent requirement. The DOJ has asserted that the provisions effectively gave Qualcomm an inappropriate level of control over Flarion’s business prior to Hart-Scott-Rodino clearance in violation of the Hart-Scott-Rodino Act. The companies disagree with the DOJ’s position.”
Qualcomm may also be in legal trouble with officials from the Korean Fair Trade Commission, who recently visited Qualcomm’s offices in Korea, as well as the offices of its chip customers Samsung Electronics Co. Ltd., LG Electronics Co. Ltd. and Pantech Curitel. Qualcomm said the KFTC didn’t provide details about their inquiry, but Qualcomm supposed that the matter was related to a complaint from a small, unnamed Korean company that related to Qualcomm’s distribution of mobile video software, which can be used in its chipsets.
