Summary of Commission Decision

of 7 October 2020

relating to a proceeding under Article 102 of the Treaty on the Functioning of the European Union and Article 54 of the EEA Agreement

(Case AT.40608 – Broadcom)

(notified under document C(2020) 6765)

(Only the English text is authentic)

(Text with EEA relevance)

(2021/C 81/09)

On 7 Otober 2020, the Commission adopted a decision relating to a proceeding under Article 102 of the Treaty on the Functioning of the European Union and Article 54 of the EEA agreement. In accordance with the provisions of Article 30 of Council Regulation (EC) No 1/2003 (1) , the Commission herewith publishes the names of the parties and the main content of the decision, including any penalties imposed, having regard to the legitimate interest of undertakings in the protection of their business secrets.

1. INTRODUCTION

(1)

The Decision makes binding the commitments offered by Broadcom Inc. (‘Broadcom’) to meet the Commission’s concerns as expressed in its preliminary assessment, pursuant to Article 9(1) of Council Regulation (EC) No 1/2003 of 16 December 2002 on the implementation of the rules on competition laid down in Articles 81 and 82 of the Treaty (‘Regulation (EC) No 1/2003’).

2. PROCEDURE

(2)

On 26 June 2019, the Commission opened proceedings with a view to adopting a decision under Chapter III of Regulation (EC) No 1/2003. On the same day, the Commission adopted a Statement of Objections (‘SO’) addressed to Broadcom outlining the Commission’s preliminary conclusions as regards the need to impose interim measures, pursuant to Article 8 of Regulation (EC) No 1/2003, relating to specific aspects of Broadcom’s behaviour that was subject to the Commission’s investigation.

(3)

On 16 October 2019, the Commission adopted a decision pursuant to Article 8 of Regulation (EC) No 1/2003 (‘interim measures Decision’), which set out its conclusions as regards the existence of a prima facie infringement of competition rules and the need to impose interim measures due to the risk of serious and irreparable damage to competition brought about by Broadcom’s conduct. The interim measures Decision ordered Broadcom to unilaterally cease to apply with immediate effect certain exclusivity-inducing provisions contained in agreements with six of its customers.

(4)

On 1 April 2020, Broadcom submitted initial commitments (‘the Initial Commitments’) to the Commission in response to the concerns that were outlined in the SO and the interim measures Decision. On 30 April 2020, the Commission published a notice in the Official Journal of the European Union pursuant to Article 27(4) of Regulation (EC) No 1/2003 (the ‘Market Test’), summarising the case and the Initial Commitments and inviting interested third parties to provide their observations on the Initial Commitments.

(5)

On 29 June 2020, the Commission informed Broadcom of the observations received from interested third parties following the publication of the notice. On 31 July 2020, Broadcom submitted an amended proposal for commitments (‘the Final Commitments’).

(6)

On 21 September 2020 the Advisory Committee on Restrictive Practices and Dominant Positions was consulted and issued a favourable opinion. On the same day, the Hearing Officer issued his final report.

3. PRELIMINARY ASSESSMENT

3.1. Relevant products and markets

(7)

The Decision concerns certain types of integrated circuits (‘ICs’) incorporated into network access equipment that is installed at customer premises (so-called customer premises equipment, ‘CPE’). More specifically, the products concerned are: (i) Systems-on-a-chip (‘SoCs’); (ii) Front-end chips (‘FE chips’); and (iii) WiFi chipsets for incorporation into set-top boxes (‘STBs’) and residential gateways.

(8)

In its preliminary assessment, the Commission concluded that, prima facie, there are separate worldwide markets for: (i) STB SoCs; (ii) SoCs for fibre residential gateways; (iii) SoCs for xDSL residential gateways; and (iv) SoCs for cable residential gateways.

3.2. Dominance

(9)

In its preliminary assessment, the Commission concluded that, prima facie, Broadcom holds a dominant position in the worldwide markets for the following products: (i) STB SoCs; (ii) SoCs for xDSL residential gateways; and (iii) SoCs for fibre residential gateways.

3.3. Practices raising concerns

(10)

In its preliminary assessment, the Commission took the view that, prima facie, Broadcom’s conduct breached Article 102 of the Treaty on the Functioning of the European Union (‘Treaty’) and Article 54 of the EEA agreement by entering into agreements containing exclusivity-inducing contractual conditions with six large original equipment manufacturers (‘OEMs’), who source SoCs and other products from Broadcom for incorporation into STBs and/or residential gateways. These exclusivity-inducing provisions can be grouped into two different types of potential restrictions of competition: (i) exclusivity and quasi-exclusivity arrangements; and (ii) leveraging restrictions.

(11)

As to the first type of restriction, the Commission took the preliminary view that, prima facie, Broadcom entered into agreements containing obligations or promises from OEMs to obtain products in which Broadcom is prima facie dominant exclusively or almost exclusively from Broadcom. In addition, the Commission prima facie considered that Broadcom entered into agreements containing provisions that make the granting of certain advantages conditional on the customer obtaining products in which Broadcom is prima facie dominant exclusively or almost exclusively from Broadcom.

(12)

As to the second type of restriction, the Commission’s preliminary assessment concluded that, prima facie, Broadcom entered into agreements containing provisions that could leverage Broadcom’s market power from one or more product markets to one or more adjacent but separate product markets.

(13)

In its preliminary assessment, the Commission took the view that, prima facie, Broadcom’s exclusivity-inducing provisions are capable of affecting competition, and that Broadcom has not provided sufficient evidence that its conduct is counterbalanced or outweighed by advantages in terms of efficiencies that also benefit the consumer: Moreover, the Commission took the view that Broadcom’s conduct is prima facie capable of affecting the pattern of trade in goods between Member States.

4. COMMITMENTS

4.1. Initial Commitments

(14)

While Broadcom disagrees with the Commission’s preliminary assessment, it has nevertheless offered the following Initial Commitments pursuant to Article 9(1) of Regulation (EC) No 1/2003 in order to meet the Commission’s competition concerns.

(15)

At worldwide level (excluding China), Broadcom offered, for a period of five years:

(a)	Not to require or induce by means of certain type of advantages an OEM to obtain more than 50 % of its requirements for SoCs for STB, xDSL residential gateways and fibre residential gateways from Broadcom; and

(b)

Not to condition the supply of, or the granting of advantages for, SoCs for TV STB, xDSL residential gateways and fibre residential gateways on an OEM obtaining from Broadcom more than 50 % of its requirements for any other of these products, or for other products which were within the scope of the interim measures SO or Decision (i.e. SoCs for cable residential gateways, FE chips for STBs and residential gateways and/or Wi-Fi chipsets for STBs and residential gateways).

(16)

At EEA level, Broadcom offered, for a period of five years:

(a)	Not to require or induce by means of certain type of advantages an OEM to obtain more than 50 % of its EEA requirements for SoCs for STB, xDSL residential gateways and fibre residential gateways from Broadcom; and

(b)	Not to condition the supply of, or the granting of advantages for, SoCs for STB, xDSL residential gateways and fibre residential gateways on an OEM obtaining from Broadcom another of these products or any other product within the scope of the interim measures SO or Decision.

(17)

The Initial Commitments included additional provisions with regard to obligations and inducements to bid equipment based on Broadcom products as well as certain commitments with regard to service providers in the EEA. They also prevented Broadcom from circumventing or attempting to circumvent the commitments in any way.

4.2. Revised commitments in light of the Market Test

(18)

In response to observations received from interested third parties during the Market Test, Broadcom modified the Initial Commitments and submitted the Final Commitments on 31 July 2020. The Final Commitments modified the Initial Commitments in a number of aspects, in particular:

(a)	The 50 % threshold of the Initial Commitments is removed in the EEA with respect to OEMs and service providers;

(b)	The duration of the commitments is extended to seven years;

(c)	The reporting obligations incumbent on Broadcom are reinforced;

(d)	The non-circumvention clause is complemented by a separate commitment concerning interoperability.

5. CONCLUSION

(19)

The Final Commitments adequately respond to the concerns expressed in the Commission’s preliminary assessment and to the concerns raised by respondents to the Market Test. In particular, they ensure that Broadcom will suspend any agreements which, according to the Commission’s preliminary assessment, may have an exclusivity-inducing effect and therefore may be in violation of Article 102 of the Treaty and Article 54 of the EEA agreement, and refrain from entering into equivalent agreements for a period of seven years. With regard to the EEA, the Final Commitments prevent Broadcom from making the supply of relevant products or the granting of non-price advantages or retroactive price advantages related to the relevant products conditional on an OEM obtaining any minimum percentage of its requirements for that relevant product, another relevant product or other product from Broadcom, with equivalent limitations applying to Broadcom’s dealings with EEA service providers.

(20)

Broadcom has not offered less onerous commitments that also address the Commission’s concerns adequately. The Final Commitments accordingly comply with the principle of proportionality.

(1) OJ L 1, 4.1.2003, p. 1. Regulation as amended by Regulation (EC) No 411/2004 (OJ L 68, 6.3.2004, p. 1).