A European antitrust probe of chipmaker Broadcom has been settled at an impressive clip, a little over a year after formally kicking off.
The Commission announced today it has accepted commitments from the U.S. chipmaker to suspend all existing agreements containing exclusivity or quasi-exclusivity arrangements and/or leveraging provisions concerning Systems-on-a-Chip (SoCs) for TV set-top boxes and Internet modems.
Broadcom has also committed not to enter into new agreements comprising such terms for a period of seven years. While it has 30 days to scrub any offending contract clauses and comply with the legally binding agreement.
The development comes a little over a year after EU antitrust regulators announced their formal investigation of Broadcom’s SoC business, in June 2019 — acting then on concerns that contractual restrictions risked seriously or irreparably damage competition.
It’s also just under a year since the Commission followed that up by seeking to act preemptively by applying so-called ‘interim measures’.
In October 2019 EU lawmakers ordered the chipmaker to stop applying exclusivity clauses in agreements with six of its major customers — giving the company 30 days to do so in a bid to put a halt to suspected competitive harm while regulators continued to dig into the detail.
Now the whole case is water under the bridge with the Commission accepting commitments from Broadcom and making them legally binding under EU antitrust law. (It also specifies that it’s closing proceedings with regard to “other matters” related to the opening of the formal probe — while retaining the stick of “full discretion to investigate in the future” should it deem another intervention necessary.)
Per the Commission, an initial Broadcom proposal was tested, via a market stakeholder consultation, in April 2019 — “to verify the appropriateness” — leading to an amended proposal, in July 2020, which it describes as an “improved” offer. In this final offer the chipmaker has agreed commitments that are binding across the European Economic Area, and also some that are binding worldwide (excepting China).
Here’s the substance of its commitments as the Commission has seen fit to set it out:
At European Economic Area (EEA) level, Broadcom will:
Not require or induce by means of price or non-price advantages an OEM to obtain any minimum percentage of its EEA requirements for SoCs for TV set-top boxes, xDSL modems and fibre modems from Broadcom; and
Not condition the supply of, or the granting of advantages for, SoCs for TV set-top boxes, xDSL modems and fibre modems on an OEM obtaining from Broadcom another of these products or any other product within the scope of the commitments (i.e. SoCs for cable modems, Front End Chips for set-top boxes and modems and/or Wi-Fi Chips for set-top boxes and modems).
At worldwide level (excluding China), Broadcom will:
Not require or induce an OEM by means of certain types of advantages to obtain more than 50% of its requirements for SoCs for TV set-top boxes, xDSL modems and fibre modems from Broadcom; and
Not condition the supply of, or the granting of advantages for, SoCs for TV set-top boxes, xDSL modems and fibre modems on an OEM obtaining from Broadcom more than 50% of its requirements for any other of these products, or for other products within the scope of the commitments.
“The commitments are binding vis-à-vis all device manufacturers [OEMs] and include products not covered by the interim measures decision,” the Commission notes in a press release, adding: “The commitments also include specific provisions regarding incentives to bid equipment based on Broadcom products as well as certain additional clauses with regard to service providers in the EEA.”
Commenting on the settlement in a speech, the EU’s competition chief, Margrethe Vestager, said: “The scope of these commitments goes beyond the European Economic Area. This is necessary in light of the economies of scale that are typical in the semiconductors industry: manufacturers need to produce large amounts of chipsets in order to be competitive. Broadcom’s offer makes us comfortable that existing competitors and potential new entrants will have a sufficiently large portion of the market open to them to be credible players in these markets.”
“The commitments apply to all of Broadcom’s direct customers, that is the makers of modems and set-top-boxes, and not only to the six device manufacturers whose contracts with Broadcom were analysed in the interim measures decision. They also apply to Broadcom’s indirect customers in Europe to avoid circumvention and to prevent Broadcom from entering into similar exclusivity agreements with them. This is because very often these service providers have a say on the choice of chipsets to be incorporated in the devices they buy.”
Vestager also made a point of characterizing the case as “important” — claiming it as an example of “effective competition law enforcement” in fleet-of-foot action.
“Effective competition may not always be best achieved by imposing fines after reaching a final decision on the existence of an infringement. Accepting timely and comprehensive commitments can be an equally effective way to promote fair competition to the benefit of consumers,” she argued, adding: “When the legal requirements are met, interim measures prevent irreparable harm from happening while the Commission is investigating a case. And in so doing, they also allow for commitments discussions to take place in a more efficient manner and without the risk of the market deteriorating in the meantime.”
The EU’s ‘interim measures’ flex certainly appears to have concentrated minds at Broadcom on settling with the Commission, rather than seeking to draw things out with lawyers. Although the proof of the pudding will of course be in the eating. (Or, less figuratively, in whether or not these commitments succeed in supporting vibrant competition for these specific SoCs or not.)
When Vestager dusted off the interim measures tool last year, to wield it at Broadcom, it was the first time in 18 years that Commission regulators had done so.
“Interim measures are one way to tackle the challenge of enforcing our competition rules in a fast and effective manner. This is why they are important. And especially that in fast moving markets,” she said then, adding: “Whenever necessary I’m therefore committed to making the best possible use of this important tool.”
Beyond that, the relatively alacrity of the Broadcom case looks like a sign of where the Commission wants to get to on ‘big tech’ regulation — a very hot topic these days — given EU lawmakers have has also been consulting on antitrust regulators getting a new power to proactively intervene in digital markets to prevent tipping.
At the same time, ex ante regulation of dominant ‘gatekeeper’ platforms is also on the menu of the forthcoming Digital Services Act package which will update the EU’s long standing rules for Internet business. So it seems a fair bet to expect more alacritous Internet antitrust action across the bloc in the coming years.