Broadcom Ordered To Stop Exclusivity Deals

The European Commission has ordered chipmaker Broadcom Inc. (NASDAQ: AVGO) to stop applying certain exclusivity deals it has with six of its customers. The Brussels-based institution is imposing so called “interim measures” based on preliminary findings from an antitrust investigation currently being carried out. The commission says the measures are needed because part of Broadcom’s business could be creating “serious and irreparable harm to competition.”

Under the terms of the order, Broadcom must stop applying “anticompetitive provisions” in agreements with the customers and inform them it will no longer apply such measures. It cannot agree to provisions with the same or similar effect, and cannot take any retaliatory practices intended to punish customers with an equivalent effect. Broadcom must comply with these measures within 30 days.

The European Commission began investigations into Broadcom a year ago over its exclusivity agreements. The exclusivity clauses in its contracts granted it continued dominance in certain markets while preventing would-be competitors from accessing any customers of their own. When the Commission issued its formal objections in June, it identified seven problematic agreements. That’s been reduced to six as the scope of the investigation has been narrowed to three markets.

Broadcom can choose to appeal the commission’s decision. Should the order stand, it will apply for up to three years, or until the date of adoption of a final competition decision on the case (whichever is earlier). Broadcom wrote in a statement:

“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.”