Broadcom Penalized for Abuse of Monopoly

Article By : John Walko

The FTC echoed Europe's accusations of monopoly against Broadcom. The FTC and FCC are cracking down on anti-competitive behavior.

Communications chip specialist Broadcom seems to have learnt little from a ruling last year against it by anti-competition regulators from the European Commission.

Focusing on the same range of SoC’s, US regulators earlier this week have also ruled that the company has been using illegal and monopolistic practices. The Federal Trade Commission (FTC) claimed that Broadcom has been using long-term exclusivity agreements with OEMs and users on a wide range of broadband and video chips.

At the same time, the FCC had a go at some of the country’s largest  technology companies for continuing abuse of their market position.

According to Holly Vedova, acting director of the Commission’s Bureau of Competition, “America has a monopoly problem. Today’s action [against Broadcom] is a step toward addressing that problem by pushing back against strong-arm tactics by a monopolist in important markets for key broadband components. There is much more work to be done and we need the tools and resources to do it. But I have full confidence in FTC staff’s commitment to this effort.”

The case against Broadcom focused on its deals and agreements with both service providers and OEMs over SoCs for set-top boxes and broadband devices.

The Commission claimed Broadcom entered into exclusive and near-exclusive contracts with at least ten major OEMs that were responsible for the majority of sales of these components world-wide, and in even higher percentages in the US market. “Through these contracts and coercive tactics, Broadcom foreclosed rivals from a substantial share of the relevant product markets and harmed competition in these markets,” the FTC stressed.

The Commission had argued that Broadcom pushed through long-term supply contracts for some of these SoC’s, apparently under threat of slow delivery  or no delivery at all and even at higher prices. This, they suggested, prevented new providers from entering the market.

It was also alleged that the company had sometimes forced certain customers to purchase other types of chips exclusively or almost exclusively from Broadcom, even where there are numerous alternative sources. The FTC mentioned WLAN and streaming chips, as well as other types of communications devices.

The proposed settlement between the two sides would prohibit Broadcom from using such exclusivity contracts in the future, and prevent the company from retaliating against customers that ink deals with its competitors.

Last September, a court ruling forced Broadcom to suspend similar agreements with customers, and the chip group was forced to promise not to enter into new deals of its type.

Surprisingly, the European Commission did not force the company to pay any fines but threatened to impose penalties of up to 10% of Broadcom’s global revenues should it violate its obligations.

In this case, Broadcom reached an out-of-court settlement with the FTC, which once more did not include any financial penalty, provided the chip group significantly changed its business practices.

According to the FTC, the company must desist from “entering into certain types of exclusivity or loyalty agreements with its customers for the supply of key chips for traditional broadcast and STBs and DSL and fiber broadband Internet devices.  The company will also have to “stop conditioning access to or requiring favorable supply terms for these chips on customers committing to exclusivity or loyalty for the supply of related chips.”

The proposed order will further prohibit Broadcom from retaliating against customers for doing business with Broadcom’s competitors.

The FTC noted some of the major service providers that used the devices in question included AT&T, Comcast, Verizon and Dish.

In a statement, Broadcom said it disagreed that its actions violated the law and disagreed with the FTC’s characterizations of its business “we look forward to putting this matter behind us.”

Following the settlement, the FTC’s Chair Lina Khan signaled that the Commission would start being more assertive when it comes to dealing with such anti-competitive behavior.

She led the voting to rescind a 2015 policy that limits the FTC’s enforcement abilities, and suggested procedures were already under way to enforce rules that would set the stage for stronger deterrence of corporate misconduct.

This article was originally published on EE Times.

John Walko is a technology writer and editor who has been covering the electronics industry since the early 1980s. He started tracking the sector while working on one of the UK’s oldest weekly technology titles, The Engineer, then moved to CMP’s flagship UK weekly, Electronics Times, in a variety of roles including news deputy and finally editor in chief. He then joined the online world when CMP started the EDTN Network, where he edited the daily electronics feed and was founding editor of commsdesign.com (which, over the years, has become the Wireless and Networking Designline). He was editor of EE Times Europe at its launch and subsequently held various positions on EE Times, in the latter years, covering the growing wireless and mobile sectors.

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