The EC has required Broadcom to suspend all of the exclusivity and loyalty-inducing provisions in the contracts with six of its key Original Equipment Manufacturer customers for TV set-top-boxes and modem chipsets. The measures remain in place for a 3-year period or until the date of the adoption of the final EC decision on the case, if it comes earlier. Broadcom must also refrain from agreeing to provisions having an equivalent object or effect with these 6 OEMs. Vestager had already announced back in June that she intended to impose interim measures against Broadcom (see our alert here).
The two prongs of the interim measures decision
The EC found that there was sufficient evidence to conclude, prima facie, that Broadcom is abusing its dominant position and that it should intervene urgently due to the risk of serious and irreparable harm to competition.
The decision relies on two key theories of harm to establish a prima facie abuse:
- Strengthening of Broadcom’s dominance in set-top-box and fibre/xDSL modem chipsets. Broadcom has strengthened its dominance through exclusivity or exclusivity-inducing clauses in its contracts with these OEMs. These clauses make rebates and non-price advantages - such as early technology and premium technical support – conditional on the OEMs purchasing all or the vast majority of their requirements from Broadcom.
- Leveraging Broadcom’s dominance in chips for set-top-boxes and fibre/xDSL modems into cable modem chips where Broadcom was not found to be dominant. This leveraging has occurred by making price and non-price advantages for set-top-box and fibre/xDSL modem chipsets - where Broadcom is dominant – conditional on the OEMs buying all or most of their requirements of cable modem chips from Broadcom.
The Commission also found a sufficient degree of urgency, given the introduction of the Wi-Fi 6 standard for modems and set-top-boxes, which will prompt many new tenders for set-top-boxes and modems compliant with this new standard. It considered that, if Broadcom was allowed to continue its current exclusionary conduct, this could impede its rivals from effectively competing in these upcoming tenders.
Broadcom’s has stated that these interim measures will not have any material effect on its relationship with these six OEMs. It has said that it will appeal the decision before the General Court in Luxembourg.
Dawn of a new era?
Commissioner Vestager has broken new ground by the mere adoption of this interim measures decision, dusting off a dormant tool in the Commission’s enforcement tool box. Indeed, it has been 18 years since the EC adopted its last interim measures decision in IMS, which was suspended by the General Court.
Commissioner Vestager hopes that a renewed use of interim measures will enable the EC to take a more pro-active role in fighting exclusionary behaviour by platforms before the market tips. She has stated that the EC intends to use interim measures for faster and more effective antitrust enforcement, so we are likely to see many more interim measures decisions in the future.