The European Commission (EC) has ordered US tech giant Broadcom to stop applying certain provisions contained in agreements with six of its main customers, which it says infringes European Union (EU) regulations and could cause “irreparable” harm to competition.
Article 102 of the EU Treaty on the Functioning of the European Union (TFEU) prohibits the abuse of a dominant position that may affect trade within the EU and prevent or restrict competition. The implementation of this provision is defined in the Antitrust Regulation.
In June 2019, the EC opened an antitrust investigation to assess whether TV set-top box and modem chipsets manufacturer Broadcom was restricting competition in various markets for chipsets and components for so-called central office/head end equipment by means of certain practices, including exclusivity, tying, bundling, interoperability degradation and abusive use of intellectual property rights.
At the same time, the commission issued a statement of objections in which it preliminarily concluded that interim measures with respect to certain aspects of Broadcom’s conduct may be required to ensure the effectiveness of any final decision taken by the commission in the future.
The EC now believes that that interim measures are warranted to prevent what it calls “serious and irreparable damage” to competition from occurring in certain markets for systems-on-a-chip for TV set-top boxes and modems.
Margrethe Vestager, commissioner in charge of competition policy, said: “We have strong indications that Broadcom…is engaging in anticompetitive practices. Broadcom’s behaviour is likely, in the absence of intervention, to create serious and irreversible harm to competition.
“We cannot let this happen, or else European customers and consumers would face higher prices and less choice and innovation. We therefore ordered Broadcom to immediately stop its conduct.”
The EC’s interim measures were based on a number of elements, including: that Broadcom is, at first sight, dominant in three different markets, namely the markets for systems-on-a-chip for TV set-top boxes, fibre modems and xDSL modems; that Broadcom is, at first sight, infringing competition rules by abusing its prima facie dominant position, in particular, entering into agreements with six manufacturers of TV set-top boxes and modems which the EC says include the anticompetitive provisions.
The EC said the contracts contained clauses that it regards as having exclusive or quasi-exclusive purchasing obligations and commercial advantages, such as rebates and other non-price-related advantages – for example, early access to its technology and premium technical support – that are conditional on the customer buying these products exclusively or quasi-exclusively from Broadcom.
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The EC concluded that if Broadcom’s ongoing conduct was allowed to continue, it was likely to affect a number of tenders that would be launched in the future, also in relation to the upcoming introduction of the Wi-Fi 6 standard for modems and TV set-top boxes.
This, it said, was likely to lead to other chipset suppliers being unable to compete on merit with Broadcom and could ultimately result in serious and irreparable harm to competition in the form of exit or marginalisation of the firm’s competitors.
The EC ordered Broadcom to unilaterally cease to apply the anticompetitive provisions that the commission says it had identified and to inform its customers that it will no longer apply such provisions; refrain from agreeing the same provisions or provisions having an equivalent object or effect in other agreements with these customers; and refrain from implementing punishing or retaliatory practices having an equivalent object or effect.
Broadcom has been ordered to comply with the measures within 30 days. The interim measures apply for the earlier of three years or the date of adoption of a final decision on the substance of the company’s conduct or the closure of the EC’s investigation concerning that conduct.