Broadcom Must Halt Sales Tactic as Vestager Issues EU Order

(Bloomberg) -- Broadcom Inc. was ordered to drop allegedly unfair clauses that may compel set-top box makers to use its chips, as European Union antitrust chief Margrethe Vestager deployed a rarely used weapon meant to prevent victims from suffering while probes drag on for years.

Broadcom must end "anti-competitive provisions" in contracts within 30 days while the EU continues an investigation into allegations that the U.S. supplier forces six of its main customers to buy its chipsets. While the order announced on Wednesday is set to remain in force for three years or until the EU finishes its probe, Broadcom says it will ask an EU court to overturn it.

"The evidence that we have gathered from Broadcom’s behavior is likely to have severe negative effects on competitors before we could reach a final decision,” Vestager told reporters in Brussels. She said the so-called interim measures tool is "now on the table" and "if we find cases where interim measures would actually be the thing to do to prevent irreparable harm to competition then obviously we stand willing to use it."

The EU hasn’t used interim measures in nearly two decades. The Broadcom move comes after criticism that EU probes into Google and Intel Corp. -- where the tool wasn’t used -- took so long that victims of unfair practices were thwarted by the time fines were levied.

Court Fight

"We intend to appeal the commission’s decision to the European courts and in the meantime comply with the commission’s order,” Broadcom said, adding that it doesn’t believe the contested provisions “have a meaningful effect on whether the customers choose to purchase Broadcom products."

Officials said swift action was necessary because Broadcom’s conduct was likely to affect several upcoming tenders by telecoms providers and the introduction of the WI-Fi 6 standard for models and TV set-top boxes.

Broadcom, based in San Jose, California, has also been targeted by U.S. antitrust scrutiny of WI-Fi and switch-chip markets, a probe covering the vast majority of its chip business. Broadcom has described that investigation as immaterial.

The EU’s order would be "a landmark moment" for antitrust enforcement, especially if it’s backed by the bloc’s courts, France’s antitrust chief Isabelle de Silva said at a Paris event last week. The EU’s last attempt to use interim measures was halted by a court order in 2001. The regulator had required IMS Health to license data-collecting tools in Germany. The company later partly won a legal challenge that allowed it restrict some licenses.

Arris International Plc was among the Broadcom customers to receive a questionnaire from the EU on chips in hardware used by the cable and satellite industry to provide television and internet to consumers, Bloomberg reported in October.

(Updates with Broadcom statement in fifth paragraph.)

To contact the reporter on this story: Aoife White in Brussels at awhite62@bloomberg.net

To contact the editors responsible for this story: Anthony Aarons at aaarons@bloomberg.net, Peter Chapman, Amy Thomson

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