FTC Charges Broadcom With Illegal Monopolization of the Chip Industry

The Federal Trade Commission has filed charges against Broadcom over allegations that the chip maker monopolized the market for semiconductor components, the agency announced Friday.

According to the commission’s complaint, Broadcom entered into long-term exclusivity and loyalty agreements with both original equipment manufacturers and service providers to prevent them from buying chips from Broadcom’s rivals. The FTC’s investigation, which dates back years, found that Broadcom had been making “exclusive or near-exclusive” deals since 2016 with at least 10 manufacturers of TV set-top boxes and broadband devices. The company also threatened customers who used a rival’s product with retaliation, with nonexclusive customers facing higher prices for slower delivery times and less responsive customer support, the FTC claims.

“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,” the agency said in a press release Friday.

The FTC said that under a proposed consent order, Broadcom must stop engaging in these kinds of contracts and conditioning access to its chips based on exclusivity or loyalty deals. Broadcom would also be prohibited from retaliating against customers that do business with its competitors.

“America has a monopoly problem,” said Holly Vedova, acting director of the FTC’s Bureau of Competition, in a press statement. “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 proposed consent order is still subject to a public comment period and a final commission review. For its part, Broadcom has pushed back against the FTC’s allegations while also indicating that it’s willing to cooperate on a settlement. The company resolved a similar antitrust dispute with the European Union last October in which it agreed to stop pushing exclusivity arrangements for chips used in TV set-top boxes and modems for the next seven years.

“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 [European Commission] involving the same products,” Broadcom said in a statement to CNBC. “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.”