The European Commission’s antitrust regulators have opened an investigation into Broadcom’s exclusivity clauses with its TV and modem manufacturing customers. The Commission said the chipmaker may be in breach of EU rules.
The Commission can impose fines of up to 10% of a company’s global revenues if found in violation of EU rules. The investigation is the latest pursued by the Commission against U.S. based companies in recent years. Alphabet’s Google unit and Qualcomm were both hit with fines in relation to antitrust issues, according to a report from Reuters.
The Commission has imposed a suite of interim measures on the company as it determines whether Broadcom’s exclusivity deals are harming competition by preventing customers from buying chips from Broadcom rivals.
“TV set-top boxes and modems are part of our daily lives, for both work and for leisure. We suspect that Broadcom, a major supplier of components for these devices, has put in place contractual restrictions to exclude its competitors from the market,” said Margrethe Vestager, the commissioner in charge of competition policy, in a statement. “This would prevent Broadcom’s customers and, ultimately, final consumers from reaping the benefits of choice and innovation. We also intend to order Broadcom to halt its behaviour while our investigation proceeds, to avoid any risk of serious and irreparable harm to competition.”
In the statement, the regulators pointed out that Broadcom is the world's largest designer, developer and provider of integrated circuits for wired communication devices, and is the global leader in markets such as systems-on-a-chip used in set-top boxes (STBs) and modems; front-end chips that translate analogue inputs into digital outputs; Wi-Fi chipsets and components for headend and central office equipment.
“Broadcom is likely to hold a dominant position in various markets for the supply of systems-on-a-chip for TV set-top boxes and modems,” the Commission said in a statement. “Certain agreements between Broadcom and seven of its main customers manufacturing TV set-top boxes and modems contain exclusivity provisions that may result in those customers purchasing systems-on-a-chip, front-end chips and WiFi chipsets exclusively or almost exclusively from Broadcom. The provisions contained in these agreements may affect competition and stifle innovation in these markets, to the detriment of consumers.”
Regulators said they are gathering information on Broadcom’s alleged exclusionary practices, which the Commission argues may include setting exclusive purchasing obligations, granting rebates or other advantages conditioned on exclusivity or minimum purchase requirements, product bundling, “abusive IP-related strategies” and deliberately degrading interoperability between Broadcom products and other products.
Broadcom has been given two weeks to respond to the charges, but the company may ask for a closed door hearing to defend itself.