FTC accuses computer chip supplier Broadcom of illegal monopolization

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

Broadcom shares fell 2% on the news.

The Commission voted unanimously to bring charges against the company, and the newly appointed president Lina Khan did not participate in the vote. At the same time, the Commission voted to accept a proposed consent order signed by Broadcom for public comment.

The proposed agreement would prohibit Broadcom from entering into some exclusive or loyalty agreements with certain customers and would require the company not to condition access to chips on exclusivity or loyalty agreements. It would also prohibit Broadcom from retaliating against customers who do business with its competitors.

In a statement, Broadcom said: “We are pleased to move toward resolving this broadband issue with the FTC on terms that are substantially similar to our previous agreement with the EC involving the same products. While we do not agree that our actions violated the law and we do not agree with the FTC’s characterizations of our business, we hope to put this matter behind us and continue to focus on supporting our clients through an environment of accelerated digital transformation. We are equally pleased that the FTC’s investigation into our other businesses was closed without action. . “

The FTC alleged in its lawsuit that Broadcom has used exclusive agreements to illegally monopolize the markets for components of computer chips, known as semiconductors, that deliver television and broadband internet.

Broadcom reached a settlement with the European Commission in October 2020, as antitrust regulators in the region also questioned its exclusivity agreements. Under that agreement, Broadcom agreed to suspend those exclusivity agreements and to abide by the agreement for seven years.

The FTC said in a statement that Broadcom is “one of the few major suppliers of five related chip types.” The Commission alleged that Broadcom illegally maintained monopoly power through long-term agreements with at least ten original equipment manufacturers that manufacture set-top boxes and broadband devices. The deals allegedly prevented those OEMs from buying chips from Broadcom’s rivals. The FTC alleged that Broadcom also made similar agreements with major service providers.

“By signing 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 FTC said in the statement.

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

The charge also comes on the heels of the Commission’s first public meeting under Khan on Thursday. At the meeting, Khan, a Democrat, made it clear through her agenda that the FTC would take a much more proactive role in enforcing antitrust laws under her leadership.

While the issues up for a vote on Thursday fell along partisan lines, the agency’s two Republican commissioners voted notably with Democrats 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,” Acting Director of the FTC Competition Office Holly Vedova said in a statement. “The United States has a monopoly problem. Today’s action is a step toward addressing that problem by rejecting the heavy-handed tactics of 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 the commitment of the FTC staff to this effort. “

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