Interim Measures Imposed on Broadcom: The Re-Awakening of a Once-Dormant Tool?
The European Commission (EC) has found, on a prima facie basis, that Broadcom abused its dominant position. In order to avert the risk of serious and irreparable damage to competition, Broadcom has been ordered to cease its prima facie abusive conduct with almost immediate effect. This is the first time in 18 years that the EC has made use of such measure and could signal the re-awakening of a once-dormant tool.
Interim Measures Under EU Competition Law
The imposition of interim measures by the EC is a relatively rare occurrence. Since the Court of Justice of the European Union’s judgment in Camera Care (Case 792/79 (1980)), which held that the EC has a right to impose interim measures, the EC has imposed them on only nine occasions, with the majority being in abuse of dominance cases.
The EC’s right to impose interim measures is now codified in Art. 8(1) of Regulation 1/2003. Pursuant to Art. 8(1), the EC may impose interim measures where the following conditions are met: there is a prima facie finding of infringement of competition law (Condition 1), and there is an urgent need for such measures to avert the risk of serious and irreparable damage to competition (Condition 2). Discharging the burden of proof for establishing “irreparability” is particularly onerous, however, which explains why Art. 8(1) had never been invoked—until 16 October 2019, when the EC ordered Broadcom to stop applying certain provisions contained in agreements with six of its customers.
Interim Measures in Broadcom
In June 2019 the EC opened an investigation to examine whether Broadcom restricted competition in various markets for chipsets and components for so-called central office/head end equipment by engaging in certain practices, including tying, bundling and exclusivity. In parallel, the EC sent Broadcom a Statement of Objections (SO) preliminarily concluding that interim measures regarding certain aspects of its conduct may be required to ensure the effectiveness of any final decision. On 16 October 2019, the EC formally decided to impose interim measures on Broadcom. This was because Conditions 1 and 2 of Art. 8(1) of Regulation 1/2003 were, in the eyes of the EC, met.
Broadcom was, on a prima facie basis, found to hold a dominant position on three distinct markets for systems-on-a-chip: TV set-top boxes, fibre modems and xDSL modems.
Broadcom was found at first sight to be abusing its prima facie dominant position on the three aforementioned markets by having entered into anticompetitive clauses in agreements with six of its original equipment manufacturers for TV set-top boxes and modems. Specifically:
With a view to reinforcing its dominance, Broadcom offered commercial advantages (e.g.rebates) in return for the customer purchasing solely or quasi-solely from Broadcom
With a view to leveraging its prima facie dominance from the above-mentioned markets into the separate market for systems-on-a-chip for cable modems, Broadcom offered commercial advantages in these markets in return for the customer purchasing systems-on-a-chip for cable modems solely or quasi-solely from Broadcom
Regarding the urgent need for interim measures, the EC considered that if Broadcom’s conduct were permitted to continue, it would likely affect a number of tenders in the future, including in relation to the upcoming introduction of the WiFi 6 standard for modems and TV set-top boxes. This would in all probability lead to other chipset suppliers not being in a position to compete with Broadcom and ultimately might lead to their marginalisation or even exit.
The EC therefore required Broadcom, within 30 days of its decision and for a period of three years, to cease to apply the anticompetitive provisions and refrain from agreeing the same provisions or other provisions with equivalent object or effect in other agreements. The substantive investigation of the case remains ongoing.
Interim Measures – Alive and Kicking?
The Broadcom interim measures decision is the first time that Art. 8 of Regulation 1/2003 has been invoked. The last interim measures decision goes back 18 years, when the EC used this tool against IMS Health in 2001 (which the EC ultimately withdrew in 2003).
Until now, the EC has been reticent to make use of this procedural tool. This can be explained by the heavy burden of proof on the EC when seeking to invoke Art. 8(1). The high risk that its decisions would subsequently be challenged before the EU courts has led the EC to leave the use of interim measures to national competition authorities (NCAs). These NCAs often operate under a lower burden of proof when imposing such measures. For example, in France, where such powers are more regularly used, the French authority “only” needs to prove a serious and immediate damage to competition—which implies a lower burden of proof than that pertaining to the concept of “irreparability” enshrined in Art. 8(1) of Regulation 1/2003.
Nevertheless, the EC’s reticence to invoke Art. 8(1) appears to be fading. This is particularly the case with respect to fast-moving technology markets—owing possibly, at least to some degree, to the vociferous criticism the EC received for having taken so long to conclude the Google Shopping case. Indeed, following the Broadcom decision, Margrethe Vestager, competition commissioner and chief coordinator of the digital portfolio, warned that in fast-moving technology markets she is now “committed to making the best possible use of this important tool” in order to enforce competition rules “in a fast and effective manner”. In further testimony of the EC’s change of heart, DG Comp is now actively screening all cases to see whether they are candidates for the application of interim measures. In doing so, the EC will likely seek to draw inspiration from the significant experience that NCAs have with this procedural mechanism.
While Broadcom has challenged the EC’s interim measures decision, a re-awakening of the EC interim measures mechanism would have its advantages. For one, interim measures taken by the EC have effect throughout the European Union and thus avert any risk of different Member States taking contradictory positions in this regard. On the other hand, the speed with which interim measures are imposed is often critical. Given the length of time it took the EC to impose interim measures in Broadcom (three months from issuance of the SO), and unless the EC finds a way to expedite the procedure, it may still be more advantageous to seek interim measures from national courts which can impose them within a matter of days, albeit with only national reach.