The US Federal Trade Commission has sued chip maker Broadcom for allegedly abusing a monopoly on semiconductor components. A newly issued complaint accuses Broadcom of threatening to charge higher prices, refuse technical support, or cut off chip sales if its customers bought other products from competing companies.
Starting in 2016, Broadcom allegedly struck “exclusive or near-exclusive” deals with at least 10 companies manufacturing video set-top boxes and broadband devices like modems. It allegedly required these “strategic” partners to use a variety of Broadcom components even if they weren’t the best or cheapest option for a given device. Nonexclusive “tactical” partners were charged higher prices for slower product delivery and customer support.
When manufacturers bid to have cable and internet providers like AT&T and Verizon buy their products, the complaint says Broadcom “actively monitored” whether any of those products included components from Broadcom competitors. “Broadcom communicated to customers that disloyalty as to even a single bid involving a single relevant product could mean loss of strategic partner terms,” the FTC claims.
In one case, Broadcom allegedly retaliated against a company that hadn’t yet agreed to exclusivity, cutting off “all supply and support” when it submitted a bid that included a non-Broadcom component. The company allegedly withdrew the bid and signed the exclusivity deal.
“We are pleased to move toward resolving this broadband matter with the FTC”
The FTC wants Broadcom to sign a consent order agreeing to back off its restrictive exclusivity agreements. In a statement to The Verge, Broadcom indicated it was willing to cooperate. “We are pleased to move toward resolving this broadband matter with the FTC on terms that are substantially similar to our previous settlement with the EC involving the same products,” said a spokesperson, referring to a 2020 agreement with the European Commission. The EC agreement included a commitment to suspend all exclusive or quasi-exclusive deals and refrain from signing new deals with similar terms for seven years.
The spokesperson said Broadcom was “equally pleased” that the FTC had not proceeded with an investigation into other parts of its business; the agency had reportedly been looking at potential anti-competitive practices in areas like Wi-Fi chip sales. “While we disagree that our actions violated the law and disagree with the FTC’s characterizations of our business, we look forward to putting this matter behind us and continuing to focus on supporting our customers through an environment of accelerated digital transformation.”
In its suit, the FTC claims Broadcom wanted to lock out potential competitors at a turning point for the set-top box industry. The complaint says Broadcom had particular dominance in the market for traditional broadcast TV set-top box components and faced more potential competition for streaming box components, a category that’s grown rapidly thanks to TV cord-cutting.
Broadcom allegedly recognized that “as many consumers cut the cord, there are many other consumers who will continue using broadcast [set-top boxes] for some time to come,” and companies will need support for those boxes for years. “Broadcom recognized these threats and opportunities,” the complaint says, and it used its power to make sure potential rivals’ sales opportunities were “severely restricted.”