South Korea Fines Broadcom Over Supply Deal with Samsung

South Korea’s Federal Trade Commission (KFTC) has issued a 19.1 billion won fine ($14.3 million) to US chipmaker Broadcom for ‘unfair’ practices toward Samsung Electronics.

The watchdog said Broadcom had abused its market power to force a now-defunct long-term parts supply contract on Samsung that was unilaterally disadvantageous to the latter.

The 540-page ruling concluded that Broadcom had “restricted Samsung’s freedom to choose buyers by influencing it through pressure and even intimidation” and demanded Samsung pay up if it failed to meet Broadcom contracted sales target. In addition, the contract stipulated that Samsung remain loyal to Broadcom and not entertain offers from rivals.

The contract, which was signed in 2020 when the pandemic had caused the market to become tight, expired in August 2021 after the FTC intervened. The FTC alleged Broadcom had inflated the price of the parts, and sought to exercise corrective action which Broadcom had rejected.

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Regarding the ruling, a representative from Broadcom said, “For decades, Broadcom has been working closely with Korean customers in a fair and lawful manner and has made significant contributions to the innovation and success of the Korean economy and some of its largest technology organizations. In this matter, Broadcom worked very closely with the staff of the KFTC to reach a mutually beneficial outcome that is fair and reasonable for all parties involved and unfortunately, as a result of the unprecedented intervention of some third parties, the joint recommendation of Broadcom and the KFTC staff was not adopted by the Commission itself. Despite this, Broadcom will continue to support our customers in Korea and work with them to deliver the market-leading products for which we are known.”

The KFTC said that Broadcom’s practices were damaging to consumer welfare and hindered innovation, concluding that “(Broadcom’s) abuse of its dominant position significantly impacts competition between its own products and those from competing vendors and has a negative impact on innovation… There is no evidence of positive effects of such an activity outweighing the potential harm.”

Source: The Register