EC orders Broadcom to drop anti-competitive contract requirements

Broadcom HQ
The European Commission ordered Broadcom to stop including exclusive language in contracts with six broadband modem and TV set-top box manufacturers. (CC BY-SA 3.0)

The European Commission ordered Broadcom on Wednesday to stop requiring some provisions in contracts with six manufacturers of TV set-top boxes and modems that the EC says infringe on competition rules.

The order came out of a June antitrust investigation into whether Broadcom restricted competition for chipsets and components for central office equipment. Broadcom is the global leader in chipsets for TV set-top boxes and modems.

The EC investigated whether Broadcom required exclusive arrangements in its agreements as well as “abusive use of intellectual property rights” and other provisions. The affected manufacturers were not named.

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 “We have strong indications that Broadcom…is engaging in anticompetitive practices,” said Margrethe Vestager, an EC commissioner in charge of competition policy. “Broadcom’s behavior 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 imposed interim measures to require the U.S. company to cease applying anticompetitive provisions in its customer agreements and to inform customers it will no longer apply such provisions. Broadcom has 30 days to comply.

Broadcom said in an emailed statement that it will comply with the commission’s order but will appeal it to the European courts.

Broadcom said the provisions the EC is concerned about do not have “a meaningful effect on whether the customers choose to purchase Broadcom products. Rather, the principle effect of the commission’s decision will be to disrupt the efficiencies that Broadcom and European OEMs have achieved through strategic alignment, which multiple OEMs have testified is critical to maintaining their competitiveness.”

Broadcom said the EC action won’t have a material impact on its set-top box or broadband modem business. Broadcom said in a June 26 filing in the U.S. that its contracts with the affected manufacturers remain in force other than some provisions at issue. “We intend to continue to support these customers going forward,” Broadcom’s statement said.

In its statement on Broadcom’s practices, the EC said Broadcom is “abusing its…dominant position” in the set-top box and fiber modem and xDSL modem business by including contract clauses that contain exclusive or quasi-exclusive purchasing obligations and “commercial advantages” including rebates and early access to technology or premium tech support.

The EC said it relied on internal documents provided by Broadcom’s customers and competitors.

If Broadcom were to continue its practices, the EU said, it could impact the introduction of the WiFi 6 standard for modems and set-top boxes. “This would likely lead to other chipset suppliers being unable to compete on the merits with Broadcom and could ultimately result in serious and irreparable harm to competition in the form of exit or marginalization of Broadcom’s competitors.”

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