November 17, 2019 Finance and Tech Publication

EU tells Broadcom to stop certain business deals in unusual move

Broadcom Corp. signage is displayed outside of the company’s headquarters in Irvine, California.

Patrick Fallon | Bloomberg | Getty Images

Broadcom has been ordered to stop applying certain exclusivity deals it has with six of its customers, amid an antitrust investigation carried out by the European Union.

The Brussels-based institution believes that part of Broadcom’s business could be creating “serious and irreparable harm to competition.”

The European Commission opened an in-depth investigation into the U.S. company in June. As part of this investigation, the Commission announced Wednesday that it’s imposing interim measures to prevent any likely “harm” to competition, for three years. Broadcom must comply with these measures within 30 days from Wednesday.

“We have strong indications that Broadcom, the world’s leading supplier of chipsets used for TV set-top boxes and modems, is engaging in anti-competitive practices,” Margrethe Vestager, the EU’s competition chief, said in a statement.

“We cannot let this happen, or else European customers and consumers would face higher prices and less choice and innovation. We, therefore, ordered Broadcom to immediately stop its conduct,” Vestager added.

Broadcom, which is a major supplier to Apple, can choose to appeal to Wednesday’s decision. Khanh Lam, spokesperson for Broadcom told CNBC via email: “Broadcom’s contracts with the customers that the European Commission characterizes as exclusivity-inducing remain in force, other than the provisions at issue, and we intend to continue to support these customers going forward. We do not believe that these provisions have a meaningful effect on whether the customers choose to purchase Broadcom products.”

The same spokesperson added: “We intend to appeal the Commission’s decision to the European Courts and in the meantime comply with the Commission’s order.”

Broadcom shares closed at 290.32 on Tuesday, up by about 3% on the day. The stock is about 14% higher over the last 12 months.

European Commission gets tough

Wednesday’s decision marks the first time in 18 years that the European Commission has decided to implement interim measures, opening a precedent to ongoing and future competition probes.

“It is for me something special. It doesn’t say that now we have all cases lined up, where interim measures will be used, but it means that the tool is on the table and if we find cases that live up to the two things that have to be fulfilled at the same time, yes we will indeed use interim measures more often,” Vestager told reporters in Brussels on Wednesday.

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