By Natalie DeCoste
The Federal Trade Commission (FTC) filed charges against semiconductor manufacturer Broadcom on July 2 over allegations that the company illegally monopolized the market for semiconductor components.
The FTC announced that it filed a complaint against Broadcom for illegally monopolizing markets for semiconductor components through exclusive dealings. These semiconductor chips are used to deliver television and broadband internet services and are the core circuitry for traditional television broadcast set-top boxes, DSL, and fiber broadband devices.
“Today’s complaint reflects the Commission’s commitment to enforcing the antitrust laws against monopolists, including in high-technology industries. America has a monopoly problem. Today’s action 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,” said FTC Bureau of Competition Acting Director Holly Vedova.
According to the agency’s complaint, Broadcom has entered into and maintained agreements since 2016 with both OEMs and service providers that require them to use the company’s semiconductor chips on an exclusive or near-exclusive basis. According to the FTC, these agreements were made with at least 10 manufacturers of TV set-top boxes and broadband devices and help Broadcom maintain its monopoly in three distinct markets.
The company secured its exclusivity contracts by threatening to retaliate against “disloyal” customers in various ways, including withholding the needed chips, charging higher prices for the components, or withholding support for previously purchased components.
“By entering exclusivity and loyalty agreements with key customers at two levels of the supply chain, Broadcom created insurmountable barriers for companies trying to compete with Broadcom,” read the FTC’s press release.
The exclusivity deals in the three monopolized chip markets also help Broadcom secure loyalty commitments to supply chips in five related markets. The commitments obtained by Broadcom prevent the company’s competitors from competing on the merits of customers’ business.
In addition to the complaint, the FTC issued a proposed consent order that would settle the Commission’s charges. Under the consent order, Broadcom cannot enter into certain types of exclusivity or loyalty agreements with its customers for the supply of semiconductor chips for traditional broadcast set-top boxes and DSL and fiber broadband internet devices.
The proposed consent order also mandates that Broadcom must stop conditioning access to or requiring favorable supply terms for chips. Additionally, the FTC seeks to prohibit Broadcom from retaliating against customers for engaging in business with the company’s competitors.
The proposed consent order is still subject to a public comment period and a final commission review.
Broadcom resolved a similar antitrust dispute with the European Union last October. For that dispute, the company agreed to stop pushing exclusivity arrangements for chips used in TV set-top boxes and modems for the next seven years. In handling the FTC’s allegations, the company is taking into consideration its past settlement.
“We are pleased to move toward resolving this Broadband matter with the FTC on terms that are substantially similar to our previous settlement with the EC involving the same products. While we disagree that our actions violated the law and disagree with the FTC’s characterizations of our business, we look forward to putting this matter behind us and continuing to focus on supporting our customers through an environment of accelerated digital transformation,” said Broadcom.