Apple supplier Broadcom hit with illegal monopolization charge by FTC

The Federal Trade Commission (FTC) has voted to charge Broadcom with an antitrust complaint today for “illegally monopolizing markets for semiconductor components.” Specifically, the charge is related to Broadcom chips used in set-top boxes and broadband internet devices.

The FTC shared all the details about the antitrust complaint against Broadcom in a press release today:

“Today’s complaint reflects the Commission’s commitment to enforcing the antitrust laws against monopolists, including in high-technology industries,” said FTC Bureau of Competition Acting Director Holly Vedova. “America has a monopoly problem. Today’s action is a step toward addressing that problem by pushing back against strong-arm tactics by a monopolist in important markets for key broadband components. There is much more work to be done and we need the tools and resources to do it. But I have full confidence in FTC staff’s commitment to this effort.”

The FTC charge alleges several findings with the main one being Broadcom acting as an illegal monopoly through the sale of “three types of semiconductor components, or chips, used in devices that deliver television and broadband internet services.”

But the FTC included more chips in the complaint:

Broadcom is also one of the few significant suppliers of five related types of chips. These chips 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 analog signals to digital signals.

Apple uses Broadcom components in many of its devices, such as its Wi-Fi chips – and that may include the Apple TV. However, the complaint is focused on the relationship between Broadcom and OEMs and service providers like AT&T, Comast, Verizon, etc.

The complaint alleges that Broadcom illegally maintained its power 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’s 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. And Broadcom entered similar agreements with major U.S. and other service providers. 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.

Along with the charge, the FTC has issued a proposed consent order that could bar Broadcom from making specific exclusivity deals.

Under the proposed consent order, Broadcom will be prohibited from entering into certain types of exclusivity or loyalty agreements with its customers for the supply of key chips for traditional broadcast set top boxes and DSL and fiber broadband internet devices. Broadcom also must stop conditioning access to or requiring favorable supply terms for these chips on customers committing to exclusivity or loyalty for the supply of related chips. And the proposed order prohibits Broadcom from retaliating against customers for doing business with Broadcom’s competitors.