The European Commission opened a formal antitrust probe of Broadcom Inc., alleging the chip maker wielded its dominance of the market for chips used in modems and television set-top boxes to curtail competition.
The EU’s powerful anti-trust authority on Wednesday ordered US chipmaker Broadcom to immediately halt uncompetitive sales practices, using an unprecedented weapon against US big tech.
The European Commission took the extremely rare move of ordering interim changes from one of Silicon Valley’s pioneer companies while the EU investigation is still under way, citing “irreparable” threats to competition.
The move comes at a delicate time in transatlantic relations and risks raising the hackles of US President Donald Trump, who has accused the EU repeatedly of unfairly targeting US giants.
It also falls two days before $7.5 billion worth of European goods will be slapped with US tariffs in retaliation for illegal EU subsidies to Airbus, the planemaker.
EU Competition Commissioner Margrethe Vestager warned that Broadcom’s behaviour “is likely, in the absence of intervention, to create serious and irreversible harm to competition”.
Wednesday’s injunction relates to “exclusionary” practices the commission alleges Broadcom uses to keep competitors at bay – including setting exclusive purchasing obligations with customers, granting rebates for minimum purchases and bundling some products.
Broadcom “has put in place contractual restrictions to exclude its competitors from the market,” EU Commissioner Margrethe Vestager said.
Broadcom said the investigation is without merit and that it doesn’t expect any material impact from the investigation on its set-top box or broadband modem businesses.
“Broadcom’s contracts with these customers would remain in force, other than the provisions at issue, and it intends to continue to support these customers going forward,” the company said, adding that it would cooperate with the commission.
Commission spokesman Ricardo Cardoso said that “ongoing anticompetitive effects” of Broadcom’s behavior merited urgent intervention “to prevent serious and irreparable harm to competition.”
He said that due to Broadcom’s scale, if a smaller competitor were knocked out of the market it would likely be unable to re-enter following any eventual finding against Broadcom.
“In these circumstances, it is important to intervene early” if the evidence supports action, Mr. Cardoso said.
“The pressure has been mounting on the Commission to act more quickly,” said Alec Burnside, a partner with Dechert, an international law firm. “The question is out there whether the Commission needs to change its rulebook. This will be a test case for the effectiveness of the existing powers.”
Comply then appeal
Broadcom in a brief statement said it intended to appeal the decision in the European courts “and in the meantime comply with the commission’s order”.
With the order, Vestager significantly stepped up her scrutiny of US tech giants. Investigations typically drag on for years before companies are fined or ordered into compliance.
A landmark case against Microsoft played out for close to a decade while a case against Google on its shopping service took seven years to reach the penalty phase.
Vestager is considered a scourge of US big tech, after launching cases against Google, Apple and Amazon. She will begin a five-year term at the European Commission later this year with even more powers to regulate.
The ongoing investigation centres on Broadcom’s highly popular TV and modem chipsets, devices that offer television and internet access to customers at home or work.
The commission said it has obtained information that Broadcom might be requiring firms to buy only its components, or granting them rebates and other advantages if they buy in high volume.
The commission said it had also heard Broadcom might be bundling products or deliberately undermining the “interoperability” between Broadcom products and other products.
The commission in June sent a “statement of objections on interim measures” to Broadcom requiring it to swiftly stop such alleged practices and the company now has just 30 days to implement the changes.
Meanwhile the anti-trust investigation against Broadcom will continue, with the company at risk of major fines that can technically go as high as 10 percent of annual sales.
In 2009, Intel was fined one billion euros ($1.1 billion) in a similar case.
Other tech giants have also had to fork out to the European Union: Google accumulated eight billion euros in fines, while Qualcomm was recently fined one billion euros.
The affair takes place as European nations prepare to respond to new US tariffs on EU goods after Washington got the go-ahead from the World Trade Organization to strike back over state subsidies for Airbus.
The Europeans are expected to retaliate with their own tariffs next year in a parallel case involving Boeing, further escalating a feud that began when Trump imposed tariffs on steel and aluminium imports in 2017.