On 16 October 2019, for the first time in 18 years, the European Commission ("Commission") imposed interim measures on Broadcom - a major supplier of integrated circuits for communications devices - in order to prevent "serious and irreparable damage" to competition from occurring in certain markets for systems-on-a-chip for TV set-top boxes and modems.
| what you need to know - key takeaways |
- The Commission had not adopted interim measures in 18 years.
- Interim measures are subject to strict legal conditions under Article 8 of Regulation 1/2003: there must be a prima facie finding of infringement; and the Commission must demonstrate urgency caused by the risk of serious and irreparable damage to competition.
- Despite a finding of prima facie abuse of dominance, the Commission may take another three years to adopt a final decision.
- The Commission adopts a broad approach to the concept of "urgency", considering in this case that the likelihood that the conduct affects a "number of tenders that would be launched in the future" is sufficient to characterize the risk of serious and irreparable damage to competition.
|
As explained in our previous article on the Broadcom case, interim measures are exceptionally rare in the Commission's decisional practice. Since its power to do so was recognised by the Court of Justice in the Camera Care case almost 30 years ago, the Commission has only done so 8 times. The last time was 18 years ago in the IMS case and the measures were withdrawn following suspension by the EU Courts. Broadcom is the first use of interim measures since the entry into force of Regulation 1/2003 whose Article 8 formalises the Commission's powers in this respect.
In the decision adopted on 16 October 2019, the Commission reached the conclusion that Broadcom is, at first sight, dominant in three different markets, for systems-on-a-chip for TV set-top boxes, fibre modems and xDSL modems.
The Commission's analysis of abuse focuses on exclusivity. Broadcom prima facie abused its dominant position by entering into agreements with six manufacturers of TV set-top boxes and modems:
- containing exclusive or quasi-exclusive purchasing obligations; and
- granting commercial advantages (including rebates) made conditional on the customer buying these products exclusively or quasi-exclusively from Broadcom.
In what appears to be a quite broad approach to the notion of "urgency", the Commission found that these provisions would have resulted into "serious and irreparable" harm to competition as they would have been likely to affect a number of future tenders concerning notably the upcoming introduction of the Wi-Fi 6 standard for modems and TV set-top boxes. On this basis, Broadcom was ordered to drop these clauses and to refrain from agreeing provisions with equivalent object or effect in other agreements with customers.
The interim measures will remain in force for a period of three years or, alternatively, up to the date of the final Commission decision (if adopted earlier). The Commission thus put a longstop date on its probe. That could be read as an attempt to counter criticism that its investigations are too slow, notably in cases involving new technologies. While the aim of reducing the duration of investigations is certainly laudable, a three-year period is still considerable in a case in which the Commission found a prima facie infringement of competition rules.
Broadcom has now a 30-day deadline to implement the measures. In a statement released on the same day, the chipset supplier announced its intention to appeal the decision.
With thanks to Schéhérazade Oozeerally of Ashurst for her contribution.
