Opinion

The FTC's Dangerous Dance with Huawei and China

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Posted: Jan 30, 2019 12:01 AM
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 The FTC's Dangerous Dance with Huawei and China

In a lawsuit filed in the final days of the Obama Administration, the Federal Trade Commission launched an antitrust lawsuit (in a divided and partisan vote) against Qualcomm.  The chip manufacturer, which spends millions on research and development, licenses its patents on chip technology out to other companies for a profit.  The FTC alleged that the company was using its market power to charge higher prices for its licensing fees.  Former FTC Commissioner Maureen Ohlhausen argued at the time that it was based on a flawed economic theory with no evidence of harm.  Even more concerning than the FTC’s seemingly politically motivated case against Qualcomm is the recent involvement of a Chinese company in the FTC’s case.

As the trial kicked off, Bloomberg News and others reported that the “star witnesses” for the FTC were executives of Chinese companies.  They also reported that the governments expert witness – Michael Lasinski of 284 Partners – works for a firm that is being paid by Huawei to represent them in licensing disputes and has testified on their behalf. It stretches the limits of credulity to believe that the FTC would think it appropriate to use an employee of such a firm to examine Qualcomm’s patent pricing considering the firm’s ties to Huawei.

Huawei, China’s largest tech company, is both a licensee and competitor to Qualcomm and has been deemed a national security threat by multiple U.S. officials and agencies due to its ties to the Chinese government. And it is not just U.S. officials who think this. Officials in the Czech Republic, Australia, Canada, and in other countries have echoed concerns about the threat posed by Huawei.

In addition to the use of a firm connected to Huawei, the FTC has also called on Huawei executives to testify (as well as Lenovo, another Chinese company). This move by the FTC amounts to giving a hearing to the Chinese during a time when the White House is working hard to bring them to the economic negotiating table.

Complicating the situation further is that Huawei and Qualcomm are in a race to develop 5G, or fifth generation technology. 5G is a wireless network, like the 4G network our phones currently run on, that will bring massive advancements in data transmission speed and in “the Internet of Things” – smart devices capable of connecting to the internet. It is crucial for America to develop this technology first due to the national security implications, as well as the innovative and economic benefits it would provide.

Around the world, national security experts are warning against a future where nations are reliant on 5G technology created by China’s Huawei. During a hearing last year, Senator Richard Burr (R-NC), chairman of the Senate Intelligence Committee, said: “The focus of my concern today is China, and specifically Chinese telecoms like Huawei and ZTE, that are widely understood to have extraordinary ties to the Chinese government.”

According to Thomas Duesterberg, a senior fellow at The Hudson Institute there are concerns that Huawei and other Chinese-based tech companies “would use [5G] to gather information for purposes of acquiring technology, getting personal information, and getting national security information. The whole way they operate, it’s opaque, it’s obscure, and it’s tied to military interests.”

We are in a technological arms race. The company – or country – that controls 5G standards will lead the world in tech innovation for years to come. Qualcomm is the US company leading the development of 5G and as many – including the US government – have recognized is critical to US leadership on 5G. 

As governments around the world have recognized, if China beats the United States in the 5G race, it could have dire consequences around the world.  China would set the standards for 5G, and potentially have the capabilities to compromise the national security of governments around the globe. Imagine Huawei turning the entire US cellular grid into China’s personal spy network.

This Obama-era lawsuit against Qualcomm threatens President Trump’s agenda and relying so heavily on Chinese experts and witnesses undermines his stances on China trade.   This overzealous lawsuit should come to an end.  One can only hope that previously reported settlement talks can succeed.  We must remain mindful of our national interests and ensure that we are not unfairly and dangerously undermining American companies at the behest of their competitors– including Chinese competitors.