Broadcom applies for consent order on unfair deals with Samsung

US chipmaker Broadcom Inc. applied for a consent order to the Korea Fair Trade Commission (KFT) in July against allegations that it forced Samsung Electronics Co. and other South Korean tech firms to sign contracts in breach of Korea's Fair Trade Act, sources familiar with the matter said.

Around the end of this month, the Korean antitrust regulator will determine whether to kick off the consent order process.

If the order is approved, the Korean FTC will execute Broadcom’s compensation plans for the Korean firms and cease the investigation to quickly wrap up the case.

Broadcom, a semiconductor and infrastructure software solutions provider, allegedly compelled Samsung and other Korean smartphone makers to use its communication chips based on long-term contracts. This bans the Korean firms to use other companies’ chips for three years, according to the FTC.

Qualcomm, a US semiconductor giant and Samsung's client, reported the case of Broadcom to the FTC, Korean newspaper The JoongAng said on Friday.

The FTC has been also probing into Broadcom’s abuse of its set-top box market power. The US chipmaker is alleged to have forced Korean set-top box manufacturing partners not to use competitors’ communication chips.

The Korean FTC launched an investigation into Broadcom’s Seoul branch in February 2021 to determine if the chipmaker forced such contract provisions. In January of this year, the regulator’s Chairperson Joh Sung-wook said the FTC completed a report on Broadcom’s alleged abuse of Korean smart device manufacturers.

The Korean FTC will hold a review session on the case after Broadcom submits its opinions on the report, Joh said. It will take strict measures on business platform giants’ abuse of market dominance, particularly in the semiconductor and mobility markets, Joh added.

If the consent order is not approved, the Korean FTC is expected to take punitive actions including penalties on Broadcom’s unfavorable contracts with the Korean firms. In 2016, FTC fined Qualcomm 1.03 trillion won ($793.2 million) for forcing Samsung Electronics and other chipset manufacturers to sign unfavorable contracts.

Broadcom has been regulated by the European Commission for similar business practices. In June 2019, the EC conducted an antitrust investigation to assess whether Broadcom restricted competition for chips and components through certain practices, including exclusivity, tying, bundling, interoperability degradation and abusive use of intellectual property rights.

In October of the same year, the EC ordered Broadcom to stop applying certain provisions, which obstruct fair competition, that the firm included in contracts with six major customers.

Write to So-Hyeon Kim and Eui-Jin Jeong at alpha@hankyung.com
Jihyun Kim edited this article.