Qualcomm is being sued by the United States Federal Trade Commission for anti-competitive practices relating to the way it sells modems for devices like smartphones.

According to the FTC, Qualcomm used its dominant position as a modem supplier to muscle out competition by essentially giving smartphone manufacturers two choices: pay extra for use of its patents, or don’t make a widely available phone.

Qualcomm denies the allegations, saying they’re “based on a flawed legal theory, a lack of economic support, and significant misconceptions about the mobile technology industry.”

“No license, no chips.”

The FTC says that Qualcomm maintained a “no license, no chips” policy, whereby it would refuse to sell modems to companies that wouldn’t agree to its onerous licensing terms. Companies didn’t have much choice but agree to its terms, the FTC alleges, because Qualcomm is one of the only companies that can supply large quantities of high-end modems. If companies didn’t agree, they wouldn’t be able to make enough phones.

Qualcomm’s licensing terms required that smartphone manufacturers pay a higher-than-usual fee for phones built with a competitor’s modem, according to the commission. In effect, Qualcomm is said to have made competitors’ modems more expensive than they should be. The FTC calls this a “tax” on competitors’ products, which it says “excludes these competitors and harms competition.”

Qualcomm agreed to license these patents on fair, reasonable, and non-discriminatory (also known as “FRAND”) terms, because they’re essential to industry-wide standards. It apparently won’t license these patents directly to competing modem suppliers, therefore allowing it to overcharge phone makers by threatening their access to modems altogether.

Everyone loves a good FRAND dispute

The lawsuit says that Qualcomm’s fees are “disproportionately high” relative to how much value they contribute to an overall device. They’re also too high relative to what competitors charge to use similar technologies, according to the lawsuit.

Additionally, the FTC says, these added costs get passed down to consumers.

For its part, Qualcomm says the FTC is flat out wrong about all of this, including the core of this lawsuit. “The portrayal of facts offered by the FTC as the basis for the agency’s case is significantly flawed,” Qualcomm says in a statement. “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 painted the decision as a rushed one, designed to get ahead of the change over to a Trump administration — one that will certainly have a kinder outlook toward businesses — later this week. “We look forward to defending our business in federal court, where we are confident we will prevail on the merits,” says Don Rosenberg, Qualcomm’s general counsel.

Apple cut an exclusivity deal to get lower costs

The lawsuit includes purported details of an agreement between Apple and Qualcomm that help to illustrate how harmful the alleged anti-competitive behaviors have been.

In order to obtain relief from Qualcomm’s excessive patent licensing fees, the lawsuit says, Apple made an agreement not to use any other company’s modems for a period of five years. In exchange, Qualcomm paid back some of its fees.

The supposed agreement helps to explain why it wasn’t until this year, when the deal is said to have ended, that Apple began using Intel modems in addition to Qualcomm modems. Intel has been trying to break into the smartphone chip space pretty much any way it can, but, from the sound of it, Qualcomm’s licensing terms essentially prevented it from making much headway.

Intel declined to comment. Apple did not respond to a request for comment.

The commission alleges that Qualcomm violated the FTC Act with these actions. It’s asking that a court “undo and prevent Qualcomm’s unfair methods of competition.”

The lawsuit could be a big problem for Qualcomm. While the company is best known for making smartphone processors, most of its profits come from licensing patents, according to Bloomberg.

This isn’t the first time regulators have come after Qualcomm’s licensing tactics either. It was fined $853 million by South Korea in December. And in 2015, Chinese regulators fined Qualcomm $975 million over anti-competitive licensing terms.

Update January 17th, 5:48PM ET: This story has been updated with comment from Qualcomm.