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Broadcom Settles FTC Charges of Monopoly on Some Broadband Device Chips

Chipmaker Broadcom was charged by the FTC with requiring customers to source certain parts from the company exclusively or almost exclusively.

Chipmaker Broadcom  (AVGO) - Get Broadcom Inc. Report was charged by the Federal Trade Commission with monopolistic practices, specifically requiring customers to source certain components from the company exclusively or almost exclusively.

The agency and Broadcom entered a consent order that requires the San Jose  company to stop that effort. 

Broadcom said in a statement to Bloomberg News that it was pleased to move forward with the settlement along the lines of an earlier accord with the European Union. 

“While we disagree that our actions violated the law and disagree with the FTC’s characterizations of our business, we look forward to putting this matter behind us,” the company said.

A statement from the FTC said that Broadcom had a monopoly on three types of chips used to deliver television and broadband internet services.

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"These chips are the core circuitry that run traditional television broadcast set-top boxes as well as DSL and fiber broadband devices,” the agency said.

“Broadcom is also one of the few significant suppliers of five related types of chips,” the agency said. 

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“These chips include the core circuitry for streaming set-top boxes and cable broadband devices, along with Wi-Fi chips and ‘front-end’ chips for both set top boxes and broadband devices. Front-end chips convert incoming analog signals to digital signals,” the FTC added.

Broadcom sells the chips to manufacturers of set-top boxes and broadband devices. Those manufacturers in turn supply the devices to providers of subscription TV and internet service, like AT&T  (T) - Get AT&T Inc. Report, Charter  (CHTR) - Get Charter Communications, Inc. Class A Report, Comcast  (CMCSA) - Get Comcast Corporation Class A Report, Dish  (DISH) - Get DISH Network Corporation Class A Report and Verizon  (VZ) - Get Verizon Communications Inc. Report, the FTC says. 

Broadcom entered exclusivity accords with at least 10 device producers, “including those with the most extensive engineering and design capabilities and the strongest ties to service providers,” the FTC said. 

And “Broadcom entered similar agreements with major U.S. and other service providers,” it said. 

By entering these agreements “with key customers at two levels of the supply chain, Broadcom created insurmountable barriers for” its rivals, the FTC said.

In the consent decree, the FTC demanded that Broadcom stop entering certain exclusive agreements with users of these chips. It must not condition access to these chips on customers committing to exclusivity with or loyalty to Broadcom.

Broadcom also is prohibited from retaliating against customers for doing business with its competitors, the agency said.

At last check Broadcom shares were trading off 1% at $465.13.

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