European regulators have hit chipmaker Broadcom with a rare "interim" restriction on its behavior as their antitrust probe into the company's alleged abuse of its market power deepens.
Broadcom was ordered immediately to stop applying and enforcing "anticompetitive provisions" in its dealings with six major customers, the European Commission's competition bureau said. The order has to do with exclusivity agreements. Such agreements by suppliers are considered anticompetitive because they lock a dominant company into continued dominance. Exclusivity deals prevent would-be competitors from accessing any customers of their own, thus preventing their meaningful entry into the marketplace. In short: if nobody is allowed to buy from you, because they're forced to buy from the bigger company, then you can't sell anything, and your new business flops.
The EU has "strong indications" that Broadcom is behaving anticompetitively, said competition bureau head Margrethe Vestager. "Broadcom's behavior is likely, in the absence of intervention, to create serious and irreversible harm to competition. We cannot let this happen." The company is Europe's dominant provider of systems-on-a-chip for TV set-top boxes, fiber modems, and xDSL modems, the competition bureau said. The exclusivity clauses in its contracts not only grant it continued dominance in those markets but also "allow Broadcom to leverage its dominance into the market for cable modem chipsets in which Broadcom may not yet be dominant," thus squeezing out the only other supplier of those chips. The EU's investigation of Broadcom began in June. The interim measures were imposed on a prima facie basis—legalese for something that looks to break the relevant law at first sight before a deeper probe reveals any more layers to the case. Essentially, Broadcom is now under an injunction preventing it from doing certain things while the EU's investigation continues.