Statement by Executive Vice-President Margrethe Vestager on the Commission decision to accept commitments by Broadcom to ensure competition in chipset markets for modems and set-top boxes - Main contents

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Today, the Commission has adopted a decision, making binding the commitments offered by Broadcom in the context of the Commission's investigation into Broadcom's behaviour in the markets for TV set-up boxes and internet modem chipsets.

These chipsets, also called “systems-on-a-chip” are the “brain” inside these devices. Broadcom's customers buy chips from Broadcom to manufacture TV set-top boxes and internet modems for telecom and cable operators, such as Telenet, Proximus or Deutsche Telekom, just to name a few. Consumers use these products in their homes to connect to the Internet and watch our favourite programs on a screen.

Less than a year ago, I stood here to announce that the Commission had decided to impose interim measures on Broadcom. Back then, we had come to the conclusion that, at first sight, Broadcom, the world's largest designer, developer and provider of chips for fixed video and broadband devices:

First, was dominant in three different markets: the markets of systems-on-a-chip for (i) TV set-top boxes, (ii) fibre modems and (iii) xDSL modems; and

Second, was abusing its dominant position by engaging in exclusivity and leveraging dealings with key customers. For example, Broadcom was offering significant discounts and other advantages to customers who were committing to purchase chipsets only from Broadcom.

We had also found that Broadcom's behaviour would cause serious and irreparable harm to competition if not quickly brought to an end, as competitors were about to be marginalised and pushed out of the market.

We therefore ordered Broadcom to stop this behaviour, which we considered at first sight to be illegal, while our in-depth investigation on the merits of the case continued.

Shortly after the adoption of the interim measures decision, Broadcom approached us with a commitments proposal, aimed at addressing our concerns. On 30 April this year, we launched a public consultation on the commitments submitted by Broadcom. Following the input and comments from several stakeholders, Broadcom submitted an improved offer, which is made binding by today's decision.

What is today's decision about?

In the European Economic Area, and with respect to the products for which we found Broadcom to be at first sight dominant, Broadcom has committed to three different things:

First, not to enter into agreements that would oblige customers to buy any specific amount of their total needs for these chipsets;

Second, not to enter into agreements that would incentivise customers to purchase these chipsets through rebates or other advantages; and

Thirdly, not to link the supply of these chipsets to the purchase of any minimum quantity of other chipsets.

But not only the European market is affected. Also at the worldwide level (excluding China), and with respect to the same products, Broadcom has also committed:

First, not to enter into agreements that would oblige customers to purchase more than half of their total needs for these chipsets;

Second, not to enter into agreements that would incentivise customers to purchase more than half of their total needs for these chipsets through rebates or other advantages.

Thirdly, not to link the supply of these chipsets to the customers purchasing more than half of their total need for other chipsets.

The scope of these commitments goes beyond the European Economic Area. This is necessary in light of the economies of scale that are typical in the semiconductors industry: manufacturers need to produce large amounts of chipsets in order to be competitive. Broadcom's offer makes us comfortable that existing competitors and potential new entrants will have a sufficiently large portion of the market open to them to be credible players in these markets.

The commitments apply to all of Broadcom's direct customers, that is the makers of modems and set-top-boxes, and not only to the six device manufacturers whose contracts with Broadcom were analysed in the interim measures decision.

They also apply to Broadcom's indirect customers in Europe to avoid circumvention and to prevent Broadcom from entering into similar exclusivity agreements with them. This is because very often these service providers have a say on the choice of chipsets to be incorporated in the devices they buy.

Broadcom must comply with the commitments within 30 days. Broadcom has to report to the Commission on their implementation at regular intervals and provide detailed information and documentation allowing the Commission to monitor its compliance with the commitments.

The commitments will apply for a period of seven years, which is a sufficiently long timeframe reflecting the investment and development cycles that characterise this industry.

Conclusion

Before concluding, allow me to share with you why I think this case is important.

Effective competition law enforcement is one where companies have incentives to abide by the law and feel deterred from engaging in abusive behaviour. To that end, the Treaty gives the Commission the power to impose deterrent fines to prosecute infringements.

But effective competition may not always be best achieved by imposing fines after reaching a final decision on the existence of an infringement. Accepting timely and comprehensive commitments can be an equally effective way to promote fair competition to the benefit of consumers.

When the legal requirements are met, interim measures prevent irreparable harm from happening while the Commission is investigating a case. And in so doing, they also allow for commitments discussions to take place in a more efficient manner and without the risk of the market deteriorating in the meantime.

In this case, Broadcom came forward with a comprehensive commitments proposal shortly after the adoption of the interim measures decision. This allowed us to close the proceedings within less than one year, on the basis of a solution that brings real added value for competition in chipset markets and for consumers.