Let’s get one thing straight – the United States must maintain its technological advantage over its adversaries by remaining the global leader in 5G technology.
President Trump recognizes this truth. In a series of tweets last Thursday, he spelled out the need for the United States to be the global leader in 5G. The president’s “America first” instincts here, as elsewhere, are correct. America must continue to lead the global stage in this vital technology area that intersects with communications, health care, and national defense, among other areas.
Chinese telecommunications company Huawei (a thinly-disguised organ of the Chinese government itself) and the American company Qualcomm are the two frontrunners in the global 5G race. In many ways, this competition is a microcosm of the tensions between the two nations in other areas. While the United States leads the race, China is doing everything possible to overtake us.
So what is one of the biggest hurdles to Trump’s desire for the U.S. to lead in the 5G arena? Surprisingly, it’s an agency of the federal government – the Federal Trade Commission.
The FTC is an independent agency which has oversight of issues related to intellectual property, patents, business practices, competitive pricing, and consumer rights.
Of late, the FTC has been engaged in litigation against Qualcomm – a US chipmaker and leader in 5G technology development. That litigation threatens to impair Qualcomm’s ability to continue innovating in 5G technology, the very same area where President Trump wants U.S. technology to dominate.
The five-member FTC is operating with only four members in the Qualcomm case, as the FTC Chairman, Joseph Simons, has recused himself. The result is a two-two party split within the commission, which has limited the commission's ability to settle or resolve the Obama-era case.
During Barack Obama’s presidency, the FTC – like so many other agencies– took an activist approach to its duties. In the final hours of the Obama administration, the FTC, with heavy lobbying from Apple, filed this particular case against Qualcomm. The case alleges that Qualcomm abuses its patent to impose “elevated” royalty fees.
When the FTC launched this action in January of 2017, as the Obama administration was winding down, the lone Republican commissioner on the FTC at the time, Maureen Ohlhausen, issued a strongly worded written dissent, arguing that the underlying premise for the suit lacked both economic and evidentiary support. She further argued that this type of case would “undermine intellectual property rights in Asia and worldwide.”
In its case, the FTC alleges that Qualcomm has used its market dominance in chips to charge what it insists are "elevated" royalty rates, constituting what is, effectively, a "tax."
The lawsuit rests on vague and ambiguous charges. As Ronald A. Cass, dean emeritus of Boston University School of Law, notes, the FTC’s position “does not expressly charge Qualcomm either with below-cost pricing (an antitrust violation) or with pricing in excess of reasonable royalty rates (a possible contract violation).”
The trial wrapped up in late January, and both sides now await the judge’s decision. The FTC witnesses included executives from many competitors and companies who wish to pay less for Qualcomm’s patents, such as Intel, Apple, Huawei, and Samsung. The name on the list that stands out, of course, is Huawei.
Huawei is the subject of numerous U.S. investigations, ranging from a criminal probe into the company’s alleged theft of technology trade secrets to an ongoing fraud investigation, to the broader concerns that Huawei engages in espionage on behalf of the Chinese Government. In addition, the DOJ has charged against Huawei’s CFO, Meng Wanzhou, with, among other things, conspiring to commit bank fraud and violating sanctions against Iran.
Let that settle in for a moment. The U.S. government – currently engaged in a wide array of criminal investigations into Huawei, including possible espionage acts against the U.S. government – saw fit to rely on the testimony of Huawei in the FTC case against Qualcomm.
Perhaps the FTC should have consulted the DOJ before compiling its witness list?
The FTC’s relentless pursuit of Qualcomm on weak antitrust grounds (and with the questionable testimony of a Chinese company under U.S. investigation) will have the predictable effect of crippling the U.S. leader in 5G. It will also have the unintended, but entirely foreseeable, consequence of propelling Huawei into the position of being the world’s undisputed and unchecked 5G leader.
If President Trump hopes the United States will be able to lead in 5G, a laudable goal with positive implications for national security, he could first waive the recusal of FTC Chairman Simons and then urge the FTC to discontinue its pursuit of Qualcomm.
Jenny Beth Martin is chairman of Tea Party Patriots Citizens Fund.