FTC accuses the pc chip provider Broadcom of unlawful monopoly

A sign is posted outside a Broadcom office on June 6th, 2021 in San Jose, California.

Justin Sullivan | Getty Images

The Federal Trade Commission accused the computer chip supplier Broadcom of illegally monopolizing the market for semiconductor components, the agency said on Friday.

Broadcom stock was down about 2% on the news.

The commission unanimously voted to bring charges against the company, with newly appointed chairwoman Lina Khan not taking part in the vote. At the same time, the Commission voted to adopt a proposal signed by Broadcom for approval for public comment.

The proposed agreement would prohibit Broadcom from entering into exclusive or loyalty agreements with certain customers and oblige the company not to link access to chips to exclusivity or loyalty agreements. It would also forbid Broadcom to defend itself against customers doing business with its competitors.

In a statement, Broadcom said: “We are excited to resolve this broadband matter with the FTC on terms that are broadly similar to our previous agreement with the EU on the same products. With the FTC characterizing our business, we look forward to resolving this matter behind us and continue to focus on supporting our customers in an environment of accelerated digital transformation. “

The FTC alleged in its complaint that Broadcom had used exclusive deals to illegally monopolize markets for computer chip components, called semiconductors, that supply television and broadband internet.

Broadcom reached an agreement with the European Commission in October as antitrust authorities in the region also questioned their exclusivity agreements. Under this agreement, Broadcom has agreed to suspend such exclusivity agreements and to honor the agreement for seven years.

The FTC said in a press release that Broadcom is “one of the few major providers of five related chip types”. The Commission alleged that Broadcom illegally maintained monopoly power through long-term agreements with at least 10 original equipment manufacturers that produce set-top boxes and broadband equipment. The agreements allegedly prevented these OEMs from buying chips from Broadcom’s competitors. The FTC claimed Broadcom did similar deals with major service providers.

“By entering into exclusivity and loyalty agreements with key customers at two levels of the supply chain, Broadcom has created insurmountable barriers for companies trying to compete with Broadcom,” the FTC said in a statement.

The announcement comes as the world is still feeling the effects of a major semiconductor shortage amid the pandemic.

The indictment also follows the first public meeting of the commission under Khan on Thursday. At the meeting, Khan, a Democrat, made it clear through her agenda that the FTC, under her leadership, would take a much more proactive role in enforcing antitrust law.

While the issues voted on Thursday fell across party lines, the agency’s two Republican commissioners, particularly with the Democrats, voted on Friday’s charges against Broadcom.

“Today’s complaint reflects the Commission’s commitment to enforcing antitrust laws against monopolists, including in high-tech industries,” said Holly Vedova, associate director of the FTC Bureau of Competition. “America has a monopoly problem. Today’s action is a step towards solving that problem by rolling back monopoly tactics in key markets for critical broadband components. There is still much to be done and we need the tools and resources.” But I have every confidence in the FTC staff’s commitment to this effort. “

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