The European Commission (Commission) has the power to order companies suspected of engaging in anti-competitive behaviour to stop their conduct pending a final decision in an investigation – so-called “interim measures”. The idea is that interim measures prevent activity which could irreparably damage the market before the Commission has completed its probe and had a chance to sanction the behaviour. But these powers have rarely been used. In fact, they have lain dormant since the IMS Health case 18 years ago, where the Commission imposed interim measures ordering the firm to grant a licence in relation to pharmaceuticals data.
That is, until now. In a landmark move, the Commission has on 16 October imposed interim measures on Broadcom. It has concluded that Broadcom is, at first sight, dominant in various markets for the supply of chipsets for TV set-top boxes and modems. It has also found that there are “strong indications” that Broadcom is abusing this suspected dominant position by entering agreements with six manufacturers of TV set-top boxes and modems which contain anti-competitive provisions. According to the Commission, the agreements contain clauses obliging manufacturers to buy exclusively (or almost exclusively) from Broadcom, or making commercial advantages (eg rebates and other non-price related advantages such as early access to its technology) conditional on exclusive/near exclusive purchases. These provisions, says the Commission, appear to strengthen Broadcom’s prima facie dominant position, and enable it to leverage this dominance into other related markets. The Commission has concluded that, if Broadcom’s conduct were allowed to continue without intervention, it could result in serious and irreparable harm to competition before the end of its full investigation into the company. In particular, it would impact upcoming tenders and the introduction of the WiFi 6 standard for modems and TV set-top boxes, meaning that Broadcom’s rivals may be unable to compete on the merits.
The interim measures require Broadcom to cease to apply the anti-competitive provisions identified by the Commission and to inform the manufacturers of this. Broadcom must not agree the same or similar provisions in other agreements with these customers, and cannot implement “punishing or other retaliatory practices having an equivalent object or effect”. It is required to comply within 30 days. In the meantime, the substantive investigation continues, a probe which covers issues wider than those on which the interim measures are based: as well as exclusivity, the Commission is also looking at tying, bundling, interoperability degradation and abusive use of IP rights. The interim measures will remain in place for three years, or until the end of the full investigation.
The decision will come as a blow to Broadcom, which is reportedly intending to appeal. Following the statement of objections in June (see our full summary ), the company set out its views that the Commission’s concerns were “without merit”, arguing its case at a hearing in August where it was reportedly supported by certain manufacturers who warned that any intervention would disrupt their businesses. But the Commission held firm, sending a clear indication that, after nearly two decades, interim measures are back on the table.
This will certainly satisfy calls from a number of commentators, expert reports and antitrust officials, which have argued that antitrust authorities should make more use of these powers, particularly in fast-moving digital markets. In the UK, for example, both the Furman report on digital competition and the Competition and Markets Authority Chairman Lord Tyrie have advocated greater and quicker use of interim measures. And we are seeing other antitrust authorities in the EU also employing this tool – in France, for example, the antitrust authority has been considering a number of interim measures cases in 2019. The authority notes in its annual report that, in 2018, the number of interim measures requests increased significantly (to eight, from three in 2017), a number which could increase even more in future given that the authority is set to gain the power to order interim measures on its own initiative. The Belgian competition authority has a long track record of imposing interim measures, especially in abuse cases. It used its powers against broadcasting provider Norkring België earlier this year. In Germany, forthcoming draft amendments to the antitrust rules are expected to facilitate the imposition of interim measures by the Federal Cartel Office, for example by removing the need to show irreparable damage to competition. And only last month the Latvian Competition Council imposed interim measures on public waste operators in relation to a suspect abuse of dominance in the waste treatment market. The decision has just been upheld by the court.
As far as the Commission is concerned though, while the willingness to impose interim measures is clearly there – Competition Commissioner Margrethe Vestager, commenting on the Broadcom case, has stated she is “committed to making the best possible use of this important tool” – it remains to be seen whether we will now see a flurry of such intervention. Broadcom is, after all, just one case. Having said this, with Vestager set to start a second term in office later this year, the decision lays down a marker for potential future enforcement activity by the Commission especially, as she notes, “in fast-moving markets”.