European Competition Commissioner Margrethe Vestager addresses a news conference on US chip maker Broadcom in Brussels, October 16 2019. Picture: REUTERS/YVES HERMAN
European Competition Commissioner Margrethe Vestager addresses a news conference on US chip maker Broadcom in Brussels, October 16 2019. Picture: REUTERS/YVES HERMAN

Brussels — On Wednesday, the EU’s powerful anti-trust authority ordered US chip maker Broadcom to halt uncompetitive sales practices, using an unprecedented weapon against US Big Tech.

The European Commission took the extremely rare move of ordering interim changes from one of Silicon Valley’s pioneer companies while the EU investigation is still underway, citing “irreparable” threats to competition.

EU Competition Commissioner Margrethe Vestager warned that Broadcom’s behaviour “is likely, in the absence of intervention, to create serious and irreversible harm to competition  ... We have strong indications that Broadcom, the world’s leading supplier of chip sets used for TV set-top boxes and modems, is engaging in anti-competitive practices”. 

The chip maker must now pause its deals for three years or until Brussels finishes its probe.

The move comes at a delicate time in transatlantic relations and risks raising the hackles of US President Donald Trump, who has accused the EU repeatedly of unfairly targeting US giants. It also falls two days before $7.5bn worth of European goods will be slapped with US tariffs in retaliation for illegal EU subsidies to plane maker Airbus.

Broadcom, in a brief statement, said it intends to appeal the decision in the European courts “and, in the meantime, comply with the commission’s order”.

With the order, Vestager significantly steps up her scrutiny of US tech giants. Investigations typically drag on for years before companies are fined or ordered into compliance. A landmark case against Microsoft played out for close to a decade, while a case against Google on its shopping service took seven years to reach the penalty phase.

Vestager is considered a scourge of US big tech, after launching cases against Google, Apple and Amazon. She will begin a five-year term at the European Commission later this year with even more powers to regulate.

The ongoing investigation centres on Broadcom’s highly popular TV and modem chip sets, devices that offer television and internet access to customers at home or work. The commission said it has obtained information that Broadcom might be requiring firms to only buy its components, or granting them rebates and other advantages if they buy in high volume.

The commission said it had also heard Broadcom might be bundling products or deliberately undermining the “inter-operability” between Broadcom products and other products.

In June, the commission sent a “statement of objections on interim measures” to Broadcom requiring it to swiftly stop such alleged practices; the company now has just 30 days to implement the changes.

Meanwhile, the anti-trust investigation against Broadcom will continue, with the company at risk of major fines that can, technically, go as high as 10% of annual sales. In 2009, Intel was fined €1bn in a similar case. Other tech giants have also had to fork out to the EU: Google accumulated €8bn in fines, while Qualcomm was recently fined €1bn.

The affair takes place as European nations prepare to respond to new US tariffs on EU goods after Washington got the go-ahead from the World Trade Organisation to strike back over state subsidies for Airbus.

The Europeans are expected to retaliate with their own tariffs in 2020 in a parallel case involving Boeing, further escalating a feud that began when Trump imposed tariffs on steel and aluminium imports in 2017.