On 7 October 2020, the European Commission (the "Commission") made legally binding commitments offered by Broadcom to ensure competition in chipset markets for modems and TV set-top boxes.
| what you need to know - key takeaways |
- Commitments decisions are adopted in lieu of finding an infringement and/or imposing a fine.
- The Commission is likely to make greater use of interim measures in the future to speed-up proceedings and prompt the offering of commitments in cases where the finding of an infringement is high. This would allow the Commission to counter criticisms that its investigations are too slow, notably in cases involving fast-evolving markets.
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Background
In June 2019, the European Commission ("Commission") opened a formal investigation into Broadcom, a major supplier of integrated circuits for communications devices, in relation to alleged exclusionary practices on the markets for the supply of TV and modem chipsets (see our July 2019 newsletter) in breach of Article 102 of the TFEU.
On 16 October 2019, for the first time in 18 years, the Commission imposed interim measures on Broadcom in order to prevent "serious and irreparable damage" to competition from occurring in certain markets for systems-on-a-chip ("SoCs") for TV set-top boxes and modems (see our October 2019 newsletter). It prima facie found that Broadcom had abused its dominant position on these markets by engaging in exclusivity and leveraging arrangements (e.g. discounts) with original equipment manufacturers ("OEM"). The decision ordered Broadcom to cease to apply these clauses contained in agreements with six of its main customers for three years. This decision was challenged before the EU General Court by Broadcom.
Commitments
Following the imposition of interim measures, Broadcom offered commitments to address the Commission's concerns and slightly amended them in July 2020, in light of the outcome of the market test. On 7 October 2020 (i.e. less than a year after the interim measure decision), the Commission made them legally binding vis-à-vis all OEM, at both EU and worldwide levels.
During seven years, Broadcom will not:
- offer "price or non-price advantages" to get OEM to buy "any minimum percentage" of their needs of SoCs for TV boxes and modems from Broadcom. At the worldwide level (excluding China), it will not oblige or incentivise customers to purchase more than half of their needs for these chipsets from Broadcom; and
- link the supply of, or the granting of advantages for, SoCS for TV boxes and modems to the purchase of any minimum quantity of other chipsets. At the worldwide level (excluding China), it will not link the supply of these chipsets to the customers purchasing more than half of their total needs for other chipsets.
Commissioner Vestager stressed that these commitments "will ensure that existing chipset makers competing with Broadcom and potential new entrants will be able to compete on the merits". She also praised the use of interim measures, which allows for "commitment discussions to take place in a more efficient manner and without the risk of the market deteriorating in the meantime".
Comment
The Commission is likely to use this tool more in the future to speed-up proceedings and prompt commitments in cases where the likelihood of finding an infringement is high. This would mark a turn in the Commission's stated policy regarding commitments, which are described in recital 13 of Regulation 1/2003 as being "not appropriate in cases where the Commission intends to impose a fine".
Finally, it remains to be seen whether Broadcom will maintain its challenge against the Commission's interim measures, which have become void following the decision on commitments.
With thanks to Jessica Bracker of Ashurst for her contribution.
