Risk & Compliance

FTC Charges Broadcom With Unfair Competition

The commission is committed to "enforcing the antitrust laws against monopolists, including in high-technology industries."
Matthew HellerJuly 2, 2021

Chipmaker Broadcom has been charged with using exclusivity deals with customers to create “insurmountable barriers” for competitors.

The U.S. Federal Trade Commission said Friday it had voted unanimously to charge Broadcom with engaging in anticompetitive conduct to maintain its monopoly power in the market for semiconductor components used in devices that deliver television and broadband internet services.

Under a proposed settlement, Broadcom has agreed not to require its customers to source components from the company on an exclusive or near-exclusive basis or retaliate against customers for doing business with its competitors.

The FTC’s action against Broadcom comes as it is taking steps to beef up enforcement of Section 5 of the FTC Act, which allows it to sue companies for “unfair methods of competition.”

“Today’s complaint reflects the commission’s commitment to enforcing the antitrust laws against monopolists, including in high-technology industries,” Holly Vedova, acting director of the FTC’s Bureau of Competition, said.

“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,” she added.

The FTC accused Broadcom of violating Section 5 by entering long-term agreements with at least 10 OEMs and with service providers that prevented them from purchasing chips from its competitors.

“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 commission said.

The chip maker is dominant in the market for broadcast set-top boxes, which has been declining as cord-cutting consumers switch to streaming devices.

But the FTC noted that “While demand for broadcast [set-top boxes] is declining, this decline has a ‘long tail.’ Even as many consumers cut the cord, there are many other consumers who will continue using broadcast [set-top boxes] for some time to come.”

The shifting market dynamics “presented Broadcom with an incentive and opportunity to maintain its monopoly power” over broadcast [set-top boxes] and “to use that power to weaken rivals in the markets for related products,” the commission said.