FTC charges Broadcom with illegal chip industry monopolization

The FTC believes that Broadcom has illegally used its market power to force manufacturers into contracts, and forbidding buyers of its chips from making deals with other competitors.

Broadcom is a known Apple supplier that makes components for the iPhone lineup. The company is also known for distributing components for television and broadband internet services.

The Federal Trade Commission has issued a complaint that Broadcom is engaging in illegal monopolization practices. Accusations include requiring customers to enter exclusive contracts with the company.

"Today's complaint reflects the Commission's commitment to enforcing the antitrust laws against monopolists, including in high-technology industries," said FTC Bureau of Competition Acting Director Holly Vedova.

"America has a monopoly problem," continued Vedova. "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."

The complaint alleges that Broadcom illegally maintained its power in the three monopolized markets by entering long-term agreements with both OEMs and service providers. These agreements required customers to buy required components through Broadcom exclusively or near-exclusively.

Such loyalty agreements create insurmountable barriers for competition to enter a market. The FTC's proposed consent order requires Broadcom to cease all exclusive agreements, loyalty terms, and prevent retaliation against customers for doing business with competing suppliers.

Broadcom provided a statement to AppleInsider on the matter:

"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 EC involving the same products. 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. We are equally pleased that the FTC investigation into our other businesses has been closed without action."

Such requirements shouldn't affect Broadcom's business with Apple, but it could open the door to increased competition in the market. The vote to issue the complaint and present the consent order was passed 4 to 0 with one FTC member abstaining.

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5 Comments

lkrupp 10521 comments · 19 Years

About 3 years ago

Anyone remember when Microsoft started requiring a license fee for each PC whether or not that PC came with Windows installed? This happened when PC makers started shipping hardware with Linux preinstalled.

gatorguy 24609 comments · 13 Years

This seems quite similar to the FTC vs. Qualcomm dustup, which Qualcomm eventually won.

genovelle 1481 comments · 16 Years

gatorguy said:

This seems quite similar to the FTC vs. Qualcomm dustup, which Qualcomm eventually won.

Since when are they a monopoly? I thought Qualcomm ran the market? I disagree with these judgements depending on the circumstances. For instance if the company is expanding production or creating customized chips for a product, they have every right to make sure they get a return on investment they are comfortable with.

The cost of entry is high because it requires building plants and mass hiring workers with no guarantee the products will sell well. The contracts ensure they get paid instead of a competitor swooping in after they have done the heavily lifting and stealing the profit.

These types of initiatives will have a chilling effect on innovation. Investment will become to risky

[Deleted User] 0 comments · 9 Years

genovelle said:

gatorguy said:

This seems quite similar to the FTC vs. Qualcomm dustup, which Qualcomm eventually won.

Since when are they a monopoly? I thought Qualcomm ran the market? I disagree with these judgements depending on the circumstances. For instance if the company is expanding production or creating customized chips for a product, they have every right to make sure they get a return on investment they are comfortable with.
The cost of entry is high because it requires building plants and mass hiring workers with no guarantee the products will sell well. The contracts ensure they get paid instead of a competitor swooping in after they have done the heavily lifting and stealing the profit.

1. The case against Qualcomm was related to patent licensing for cellular modems not their actual chips. The TFC complaint against Broadcom is related to televisions and broadband. So it is totally unrelated to Qualcomm. These are two different markets and monopolies are based on markets.

2. What judgment are you disagreeing with? The FTC filed a complaint, there has been no legal judgment on the matter. It sounds like you are objecting to due process.

3. Companies do have the right to et a return on their investment and literally no one is disagreeing with that. What they don't get to do it stifle competition in the process. Broadcom was requiring buyers of their chips to agree to not buy competitors products. Competitors can't "swoop in" and steal profits, Broadcom's work is protected via patent. What competitors can't do is innovate and create something the is better because there would literally be no market for it as everyone is obligated to buy from Broadcom. By your reasoning intel should have implemented agreements like this. Imagine if Apple signed an agreement to only buy intel CPUs when they moved to Mac to intel. The iPhone as we know it wouldn't exist, the iPad would have been a very different product or likely never would have been made, Apple Watch wouldn't exist, AirPods wouldn't exist and Apple Silicon based Macs wouldn't exist. That is how agreements like this kill innovation, Apple wouldn't have been allowed to design and make their own processors.