Europe casts the shadow of antitrust over US chipmakers

The European Commission likes to poke and prod US chipmakers, and now it is the turn of Broadcom to join Qualcomm in the spotlight.

Starting with Broadcom, the European Commission has now formerly opened an investigation to understand whether the firm is restricting competition through exclusivity practices, in breach of EU rules. Broadcom will face interim measures during the investigation into TV and modem chipsets markets.

“TV set-top boxes and modems are part of our daily lives, for both work and for leisure,” said Margrethe Vestager, Commissioner for competition policy. “We suspect that Broadcom, a major supplier of components for these devices, has put in place contractual restrictions to exclude its competitors from the market.

“This would prevent Broadcom’s customers and, ultimately, final consumers from reaping the benefits of choice and innovation.”

Broadcom is arguably the market leader for a number of different areas including systems-on-a-chip, the ‘brain’ of set-top box, front-end chips, the analogue to digital translation component, and WiFi chipsets, components to enable set-top boxes to deploy wireless features.

Exclusivity agreements generally tend to be ignored until a firm creates a dominant market position, which is the case here. The European Commission has stated it believes Broadcom has exclusivity agreements for the components mentioned above with seven of its biggest customers.

The customers might be happy with these agreements, perhaps there are pricing discounts based on quantity, but this is often deemed a big no-no for the European Commission. Consumers might benefit from cheaper prices in the short-term (assuming savings are passed on) but stifling competition might not be best in the long-run.

What is not entirely clear for the moment is the interim measures which would imposed against Broadcom. We’re not too sure what the European Commission would deem appropriate, though whatever is proposed is likely to be hit with an appeal from Broadcom. These semiconductor firms are used to legal proceedings and they generally don’t lie down for the abuse.

Elsewhere, Bloomberg has suggested the European Commission could be chasing another antitrust case against Qualcomm. Just as things seem to be quietening down for Qualcomm’s lawyers they might be called back into action against one of their most frequent adversaries.

This investigation is reportedly going to focus on the pricing of 3G mobile internet dongle chips supplied between 2009 and 2011, with the European Commission suggesting Qualcomm priced products at a loss to kill off competition.

The news will come as somewhat of a frustration, as the team must have thought it had afforded itself a bit of breathing room following the most recent fine. At the beginning of 2018, Qualcomm was handed a €997 million fine for abusing its dominant market position in LTE basebands. It was found Qualcomm had paid Apple ‘billions’ to shut out competitors for iPads and iPhones.