Everyone and their brother knows the Obama administration has overturned a Samsung-inspired ITC ban on US imports of some Apple [AAPL] products -- but if you read the administration's message, I suspect there could be far more trouble in store for the Korean company as competition regulators look at how it does business.
[ABOVE: Who dominates the market again?]
Friend's of FRAND
It's all in the administration's response to Samsung's attempt to usurp the meaning of FRAND patents. Is it appropriate that the company has refused to follow the spirit of such patents in order to harm the interests of its biggest competitor?
This isn't a David and Goliath struggle, or, if it is, it is Apple that is David and Samsung the giant. Apple was once the 500-pound gorilla in the smartphone room, boasting the world's most modern mobile OS and the largest slice of that side of the market.
That was yesterday.
Look at the nature of the mobile industry today and it's clear that Apple doesn't dominate the sector, Samsung does. Further, in pursuit of that dominance, Samsung seems ready to do anything.
Here's a few reasons one might think that:
- In the US Samsung has been convicted of infringing Apple patents in its early generation Galaxy products (as it has in other territories).
- Samsung holds a range of patents essential to industry standards that it seemingly has not been prepared to negotiate under terms of FRAND agreements. (NB: Samsung withdrew such attempts in Europe when regulators threatened to intervene because the EU felt such behaviour to be anti-competitive).
- Samsung has also blatantly attacked Apple and its users within its media ads.
- The Korean firm is known to have paid people to post negative comments against its competitors on sundry Websites.
- Samsung recently admitted developers were offered cash to mention its developer competition on a developer community website.
- It has recently been revealed Samsung has undermined benchmark tests in order to give its products better results.
- Samsung has also advertised products as water-resistant, even while refusing to offer a guarantee on their use in this way.
Dominance -- what cost?
What does this mean?
It means the world's dominant mobile phone manufacturer is engaged in a series of direct attacks against its strongest competitor, even while manufacturing components for the devices Apple brings to the market.
I'm no expert, but so far as I can tell we have a clear picture here in which a market dominant company is using every tool at its disposal to undermine the success of its biggest competitor.
A competitive market requires checks and balances. Fair competition is good for consumers -- unfair competition is not. Unfair competition could by some be epitomised by what appears to have been a refusal on behalf of Samsung to reach an impartial deal with Apple of SERP/FRAND patents. Unfair competition could also include blatant design imitation, provision of misleading consumer promises.
This is beyond open and honest competition. This is about undermining the principles of a free market by directly harming the business of a competitor -- it reminds me very much of the nature of the Apple versus Microsoft wars of yesteryear.
I'm not a lawyer, just an individual with an opinion, but having read the statement from the Obama administration in which the ITC ban was overturned, I sense that Samsung may soon find itself being looked at very, very closely by regulators eager to ensure it doesn't use its market dominance, market or manufacturing power, or any dirty tricks in order to crush competing firms.
Has Samsung gone too far?
This is the key part of the Obama administration response:
"The Policy Statement expresses substantial concerns, which I strongly share, about the potential harms that can result from owners of standards-essential patents ("SEPS") who have made a voluntary commitment to offer to license SEPs on terms that are fair, reasonable and non-discriminatory ("FRAND"), gaining undue leverage and engaging in "patent hold-up."
Essentially it means SEP patents must be made available in the spirit in which it was agreed they should be made available.
Some may argue that Apple's Steve Jobs started this bitter rivalry when he swore to "destroy Android". I'd observe that at the time Jobs said this, he knew his time was limited, and now he is gone. Yet the actions in the current conflict are committed by the living. Is it truly appropriate to justify actions in the present by repeating the words of a dead man? I don't believe so.
I feel a little like a canary in a coal mine as I write this. I recognize the customary cohorts of Samsung fans will reject these arguments even while the most rabid Apple fans will attempt to whip the discussion up. I'm not really aiming to stimulate either group in this, simply proposing a question I think will soon be discussed by US trade authorities.
That question is:
"Is Samsung's way of doing business anti-competitive under US law?"
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