Europe has ordered chipmaker Broadcom to stop applying exclusivity clauses in agreements with six of its major customers — imposing so called ‘interim measures’ based on preliminary findings from an ongoing antitrust investigation.
The move follows a formal statement of objections issued by the Competition Commission in June. At the time the regulator said it would seek to order Broadcom to halt its behaviour while the investigation proceeds — “to avoid any risk of serious and irreparable harm to competition”.
Today Broadcom has been ordered to unilaterally stop applying “anticompetitive provisions” in agreements with six customers, and to inform them it will no longer apply such measures.
It is also barred from agreeing provisions with the same or similar effect, and from taking any retaliatory practices intended to punish customers with an equivalent effect.
Commenting in a statement, antitrust chief Margrethe Vestager, said: “We have strong indications that Broadcom, the world’s leading supplier of chipsets used for TV set-top boxes and modems, is engaging in anticompetitive practices. Broadcom’s behaviour is likely, in the absence of intervention, to create serious and irreversible harm to competition. We cannot let this happen, or else European customers and consumers would face higher prices and less choice and innovation. We therefore ordered Broadcom to immediately stop its conduct.”
We’ve reached out to Broadcom for comment.
The chipmaker has 30 days to comply with the interim measures, though it can choose to challenge the order in court.
Should the order stand it will apply for up to three years — or the date of adoption of a final competition decision on the case (whichever is earlier).
The Commission began investigations into Broadcom a year ago.
“We have reached the conclusion that in first sight — or in legal lingo, prima facie — Broadcom is currently infringing competition rules by abusing its dominant position in the system on a chip market in TV set-top boxes, fiber modems and xDSL modems,” said Vestager today, speaking during a press conference setting out the interim measures decision.
In June, when the Commission issued formal objections, it said it believes the chipmaker holds a dominant position in markets for the supply of systems-on-a-chip for TV set-top boxes and modems — identifying clauses in agreements with manufacturers that it suspected could harm competition.
At the time it flagged seven agreements. That’s now been reduced to six as the scope of the investigation has been limited to three markets, following submissions from Broadcom after the Statement of Objections.
Vestager said the slight reduction in scope is “a reflection of a process having heard Broadcom’s arguments” over the past few months.
The use of interim measures is noteworthy — as a sign of how the EU regulator is seeking to evolve competition enforcement to keep up with market activity. It’s the first time in 18 years the commission has sought to use the tool.
“Interim measures are one way to tackle the challenge of enforcing our competition rules in a fast and effective manner,” said Vestager. “This is why they are important. And especially that in fast moving markets. Whenever necessary I’m therefore committed to making the best possible use of this important tool.”
During a recent hearing in front of the EU parliament — as the commissioner heads towards another five years as Europe’s competition chief combined with an expanded role as an EVP setting digital policy — she suggested she will seek to make greater use of interim orders as an enforcement tool.
Asked today whether she has already identified other cases where interim measures could be applied, she said she hasn’t but added: “The tool is on the table. And if we find cases that live up to the two things that have to be fulfilled at the same time, yes we will indeed use interim measures more often.
“We don’t have a line up of cases [where interim measures might be applied],” she added. “Two quite substantial conditions will have to be met. One we have to prove that it’s likely there will be serious and irreparable harm to competition, and second we’ll have to find that there is an infringement at first sight.
“[It’s] an instrument, a tool, where we still will have to be careful and precise,” she went on, noting that the Broadcom investigation has taken a full year’s investigation work up to this point. “We are careful and we will not compromise on the right for the company in question to defend themself.”
Responding to a question about whether interim measures might be more difficult to apply in digital vs traditional markets, she said the regulator will need to be able to identify harm.
“The thing is for an interim measures case to work obviously you will have to be able to identify the harm. And that of course when markets are fast moving — that is the first sort of port of call. Can we identify harm in this market?” she said. “But… we do a lot of different things to fully grasp how competition works in fast moving, platform-driven, network-driven markets in order to be able to do that. And to be able to use the instrument if we find a case where this would be the thing to do in order to prevent irreparable and serious harm to competition.”
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