Antitrust: Commission imposes interim measures on Broadcom in TV and modem chipset markets

television

(Glenn Carstens-Peters, Unsplash)

This article is brought to you in association with the European Commission.


The European Commission has ordered Broadcom to stop applying certain provisions contained in agreements with six of its main customers. This will prevent serious and irreparable harm to competition likely to be caused by Broadcom’s conduct, which prima facie (at first sight) infringes EU competition rules.

Margrethe Vestager, Commissioner in charge of competition policy, said: “We have strong indications that Broadcom, the world’s leading supplier of chipsets used for TV set-top boxes and modems, 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.”

Broadcom is the world leader in the supply of chipsets for TV set-top boxes and modems, including so-called systems-on-a-chip. Systems-on-a-chip combine electronic circuits of various components in a single unit, which constitute the “brain” of a set-top box or modem. They are essential to bring the television signals and connectivity to consumers’ premises.

In June 2019, the Commission opened an antitrust investigation to assess whether Broadcom restricted competition in various markets for these 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 where 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 interim measures decision

Today’s decision concludes that interim measures are warranted to prevent serious and irreparable damage to competition from occurring in certain markets for systems-on-a-chip for TV set-top boxes and modems. This is based on the following elements:

  • Broadcom is, at first sight, dominant in three different markets, namely the markets for systems-on-a-chip for (i) TV set-top boxes, (ii) fibre modems and (iii) xDSL modems.
  • Broadcom is, at first sight, infringing competition rules by abusing its prima facie dominant position. In particular, Broadcom entered into agreements with six manufacturers of TV set-top boxes and modems, which include the following anticompetitive provisions:

(i)   To strengthen Broadcom’s prima facie dominance in systems-on-a-chip for TV set-top boxes, fibre modems and xDSL modems, clauses containing 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; and

(ii)  To leverage Broadcom’s prima facie dominance from systems-on-a-chip for TV set-top boxes, fibre modems and xDSL modems into the separate market forsystems-on-a-chip for cable modems, clauses granting customers in these markets commercial advantages, such as price and non-price advantages, which are conditional on the customer buying systems-on-a-chip for cable modems exclusively or quasi-exclusively from Broadcom.

The Commission analysed a range of evidentiary elements, including the size and importance of the relevant customers, the conditions and duration of the agreements and contemporaneous evidence found in internal documents submitted by Broadcom’s customers and competitors.

The Commission concluded that, if Broadcom’s ongoing conduct were allowed to continue, it would likely affect a number of tenders that would be launched in the future, also in relation to the upcoming introduction of the WiFi 6 standard for modems and TV 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 marginalisation of Broadcom’s competitors.

In order to ensure the effectiveness of the Commission’s competition law enforcement powers and of any final decision on the legality of Broadcom’s conduct it may take in the future, today’s decision orders Broadcom to:

(i)   unilaterally cease to apply the anticompetitive provisions identified by the Commission and to inform its customers that it will no longer apply such provisions; and

(ii)  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 must comply with these 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 Broadcom’s conduct or the closure of the Commission’s investigation concerning that conduct.

The substantive investigation on the merits of all parts of the case is still ongoing.

Background

Article 102 of the 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 (Council Regulation No 1/2003), which can also be applied by the national competition authorities.

Pursuant to Article 8(1) of the Antitrust Regulation, interim measures may be imposed if at first sight (“prima facie”)there is an infringement of competition law rules, as well as an urgent need for protective measures due to the risk of serious and irreparable harm to competition.

There is no legal deadline for finishing an antitrust investigation. The duration of an antitrust investigation depends on a number of factors, including the complexity of the case, the extent to which the companies concerned cooperate with the Commission and the exercise of the rights of defence.

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