Shares of Qualcomm fell 4 percent on Tuesday after U.S. regulators charged the company with using anti-competitive tactics over licensing, in yet another regulatory hurdle to its business.
The Federal Trade Commission alleges that Qualcomm received high royalties for patented technologies that are "essential to industry standards." That creates in effect, "a tax" on manufacturers that used competing processors, the FTC said.
For instance, the FTC statement said, Qualcomm refused to license patents to competing suppliers, and used its exclusive relationship with Apple to keep competitors from getting stronger.
"By excluding competitors, Qualcomm impedes innovation that would offer significant consumer benefits, including those that foster the increased interconnectivity of consumer products, vehicles, buildings, and other items commonly referred to as the Internet of Things," the FTC said in a statement.
Bloomberg originally reported the antitrust case, citing people familiar with the matter, writing on Tuesday that the semiconductors giant could face a suit from U.S. officials for allegedly using "unfair practices in the way it licenses its technology."
In response to the suit, Qualcomm told CNBC that the FTC's complaint is based on "flawed legal theory, a lack of economic support and significant misconceptions about the mobile technology industry." Don Rosenberg, executive vice president and general counsel at Qualcomm, said that the company has "grave concerns" about the decision to file the complaint right before the turnover to a new federal administration.
"The complaint seeks to advance the interests and bargaining power of companies that have generated billions in profit from sales of products made possible by the fundamental 3G and 4G cellular technology developed by innovators like Qualcomm," the company said in a statement. "The portrayal of facts offered by the FTC as the basis for the agency's case is significantly flawed. In particular, Qualcomm has never withheld or threatened to withhold chip supply in order to obtain agreement to unfair or unreasonable licensing terms. The FTC's allegation to the contrary — the central thesis of the complaint — is wrong."
Qualcomm has argued its licensing follows industry standards and are also used by other companies, the report said. Late last month, South Korea's antitrust regulator fined Qualcomm 1.03 trillion won for what it called "unfair business practices," Bloomberg reported.
With Tuesday's losses, the stock is down about 3 percent in the past month.