The US Federal Trade Commission (US) has issued a complaint against Broadcom, accusing the company of illegally monopolizing markets for semiconductor components used to deliver television and broadband internet services “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 FTC said, adding that the practic prevented Broadcom peers from competing for customer business on merit.
The FTC has as a result issued a proposed consent order, which prohibits Broadcom from inking certain types of exclusivity or loyalty agreements for the supply of key chips for traditional broadcast set top boxes and DSL and fibre broadband internet devices. The company must also stop conditioning access to, or requiring favourable supply terms for these chips on customers committing to exclusivity or loyalty for the supply or related chips. The proposed order also means Broadcom cannot retaliate against customers for doing business with competitors.
The commission explained that Broadcom was a monopolist for the sale of three types of semiconductor chips, used in the core circuitry of set top boxes, DSL and fibre broadband devices. The FTC noted that Broadcom it is also one of the few significant suppliers of five related types of chips. These 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 analogue signals to digital signals.
Broadcom’s direct customers are original equipment manufacturers, or OEMs, which use the 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 subscriptions. The company reportedly maintained its power illegally 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 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.” The company entered similar agreements with major US and other service providers.
