The European Commission has announced it is to open an antitrust investigation into chip maker Broadcom over accusations that it has been enacting exclusionary practices to keep rivals out of the set-top-box and modem markets.
Perhaps best known for providing the technology that powers the Raspberry Pi family of educational single-board computers, Broadcom is no stranger to controversy: After paying £4.74 billion to acquire rival Brocade in 2016 the company offered nearly £100 billion for larger competitor Qualcomm, and when it was rebuffed began a hostile takeover attempt which would eventually be nixed by order of US President Donald Trump - only to have the company announce its intention to redomicile in the US seemingly with the specific intention of continuing its efforts to absorb Qualcomm, though the impact of an ongoing trade war between the US and China on Broadcom's finances may have dampened its enthusiasm.
Now, the company is being investigated by the European Commission over claims it has used illegal exclusionary practices to keep competitors away from its lucrative set-top box and modem markets. '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,' explains Commissioner Margrethe Vestager. '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.'
While it investigates the matter, the Commission has issued a Statement of Objections which claims that 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' and that '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 [and] may affect competition and stifle innovation in these markets, to the detriment of consumers.'
These practices, the Commission explain, include the granting of rebates or other advantages for customers who agree to use Broadcom parts exclusively or who agree to minimum purchase requirements; the bundling of products such that they can't be purchased separately; abuse of its intellectual property rights; and, most tellingly, 'deliberately degrading interoperability between Broadcom products and other products.'
Broadcom has not yet issued a statement on the matter.
Broadcom has filed a Form 8-K with the US Securities and Exchange Commission (SEC), which doubles as its official statement on the European Commission's investigation. 'Broadcom believes it complies with European competition rules and that the Commission’s concerns are without merit. Broadcom will respond to the Commission regarding its objections and proposed interim measures. Broadcom will continue to cooperate with the Commission and looks forward to discussing procedural and substantive matters with the Commission over the coming weeks and months.'
The company has also indicated that the Commission's planned interim measures will not prevent it from selling any existing products, nor affect any existing contracts with customers except those clauses identified by the Commission as potentially anti-competitive.
January 24 2020 | 12:00