FTC charges Broadcom with illegal monopolizationFriday, July 2nd, 2021
FTC Charges Broadcom with Illegal Monopolization and Orders the Semiconductor Supplier to Cease its Anticompetitive Conduct
The Federal Trade Commission has issued a complaint charging Broadcom with illegally monopolizing markets for semiconductor components used to deliver television and broadband internet services through exclusive dealing and related conduct. The Commission has also issued a proposed consent order that would settle the Commission’s charges. Under the consent order, Broadcom must stop requiring its customers to source components from Broadcom on an exclusive or near exclusive basis.
“Today’s complaint reflects the Commission’s commitment to enforcing the antitrust laws against monopolists, including in high-technology industries,” said FTC Bureau of Competition Acting Director Holly Vedova. “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.”
Broadcom is a monopolist in the sale of three types of semiconductor components, or chips, used in devices that deliver television and broadband internet services, according to the FTC’s complaint. These chips are the core circuitry that run traditional television broadcast set top boxes, as well as DSL and fiber broadband devices.
Broadcom is also one of the few significant suppliers of five related types of chips. These chips include the core circuitry for streaming set top boxes and cable broadband devices, along with Wi-Fi chips and “front-end” chips for both set top boxes and broadband devices. Front-end chips convert incoming analog signals to digital signals.
Broadcom’s direct customers are original equipment manufacturers, or OEMs, which use Broadcom’s components to build set top boxes and broadband devices. OEMs supply these devices to television and broadband service providers—such as AT&T, Charter, Comcast, DISH and Verizon—which in turn provide the devices to consumers in connection with their subscription television or internet services. Because Broadcom supplies the core components for devices used by service providers, both OEMs and downstream service providers play important roles in the selection of components used in set top boxes and broadband devices.
The complaint alleges that Broadcom illegally maintained its power in the three monopolized markets by entering long-term agreements with both OEMs and service providers that prevented these customers from purchasing chips from Broadcom’s competitors. These agreements required customers to purchase, use or bid Broadcom’s chips on an exclusive or near-exclusive basis. Broadcom entered these exclusivity and loyalty agreements with at least ten OEMs, including those with the most extensive engineering and design capabilities and the strongest ties to service providers. And Broadcom entered similar agreements with major U.S. and other service providers. 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.
The complaint also alleges that Broadcom leveraged its power in the three monopolized chip markets to extract from customers exclusivity and loyalty commitments for the supply of chips in the five related markets. These commitments prevented Broadcom’s competitors from competing on the merits for customers’ business.
Under the proposed consent order, Broadcom will be prohibited from entering into certain types of exclusivity or loyalty agreements with its customers for the supply of key chips for traditional broadcast set top boxes and DSL and fiber broadband internet devices. Broadcom also must 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. And the proposed order prohibits Broadcom from retaliating against customers for doing business with Broadcom’s competitors.
The Commission vote to issue the complaint and accept the proposed consent order for public comment was 4-0-1, with Chair Lina Khan not participating. The FTC will publish the consent agreement package in Federal Register shortly. Instructions for filing comments appear in the published notice. Comments must be received 30 days after publication in the Federal Register. Once processed, comments will be posted on Regulations.gov.