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Federal Register / Vol. 86, No. 150 / Monday, August 9, 2021 / Notices
lotter on DSK11XQN23PROD with NOTICES1

broadband devices, and iii SOCs for fiber broadband devices the Monopolized Products. In addition, Broadcom is one of few significant suppliers of iv Wi-Fi chips for CPE
devices, v front-end chips for CPE
devices, vi SOCs for streaming STBs, and vii SOCs for cable broadband devices collectively, the Related Products, and together with the Monopolized Products, the Relevant Products.2 Broadcom also provides essential ongoing engineering and software support services for devices containing its components. The markets for Monopolized Products and Related Products are concentrated and have significant barriers to entry and expansion.
As early as 2016, Broadcom recognized that it faced competitive threats to its monopoly power in Monopolized Products from low-priced, nascent rivals. Broadcom understood that nascent rivals could, by working with key OEMs and service providers, become stronger, more effective competitors. Leading service providers and OEMs were seeking to lessen their dependence on Broadcom and to foster competition in CPE component markets.
These customers sought componentsupplier diversity for multiple reasons, including to promote competitive pricing and to ensure continuity of supply. Another factor threatening Broadcoms monopoly power was the ongoing cord-cutting trend, whereby consumers were beginning to move away from traditional broadcast e.g., cable or satellite television service and instead to access television and other video content via a streaming internet connection. This trend threatened Broadcom because its market position was stronger in broadcast STB SOCs where it has monopoly power than in streaming STB SOCs.
These market conditions presented Broadcom with the incentive and opportunity to engage in anticompetitive conduct aimed at maintaining its monopoly power in markets for Monopolized Products and to use that power to weaken rivals and harm competition in markets for Related Products.
B. Broadcoms Anticompetitive Conduct Broadcom acted to maintain its monopoly positions and unreasonably restrain competition by implementing a wide-ranging exclusivity program in which it conditioned customers access streaming internet protocol IP signals, often over an internet connection.
2 The proposed order refers to Monopolized Products and Related Products as Primary Products and Secondary Products, respectively.

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to Monopolized Products and support services for these products on commitments to source Relevant Products from Broadcom on an exclusive or near-exclusive basis.
Broadcom implemented this exclusivity program through a series of long-term contracts entered with both OEMs and service providers, and through an accompanying campaign of ad hoc threats and retaliation. As a result, sales opportunities for Broadcoms rivals were severely restricted.
Between 2016 and the present, Broadcom negotiated and entered agreements with leading OEMs pursuant to which the OEMs agreed, for contract and renewal terms spanning multiple years, to purchase, use, or bid Broadcoms Relevant Products in STBs and broadband devices on an exclusive or near-exclusive basis. In all, Broadcom entered exclusive or nearexclusive agreements with at least ten OEMs which collectively are responsible for a majority of STB and broadband device sales worldwide and even higher percentages of STB and broadband device sales in the United States. These OEMs included the largest and most capable CPE OEMsthose with the largest market shares, the most extensive engineering and design capabilities, and the strongest reputations and relationships with downstream service provider customers.
Broadcom also negotiated and entered a series of agreements with major service providers pursuant to which the service providers committed, for contract terms spanning multiple years, to use Broadcoms Relevant Products on an exclusive or near-exclusive basis for their STBs and broadband devices. As with the OEMs targeted by Broadcom, these were among the largest, most advanced, and most innovative service providers in the worldthose best positioned, absent their agreements with Broadcom, to enable Broadcoms nascent competitors.
In the course of securing and policing these long-term agreements, and also of obtaining exclusive or near-exclusive business from customers with which it did not enter formal long-term agreements, Broadcom routinely employed coercive leveraging tactics grounded in its monopoly power and spanning across product categories. For example, Broadcom communicated to OEM customers that disloyalty for even a single bid involving a single Relevant Product could mean loss of favorable price and non-price terms across numerous product lines, including Monopolized Products unrelated to that specific bid. And it communicated to service providers that if a service
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provider did not limit its purchases from Broadcoms rivals, Broadcom would implement large increases in the fees it charged for support services on devices containing Broadcom Monopolized Products already deployed on the service providers networks.
C. Competitive Impact of Broadcoms Conduct Broadcoms exclusivity program weakened competitors by foreclosing them from substantial portions of the markets for Relevant Products. It raised its rivals costs by forcing rivals competing for a design award to be prepared to compensate customers for the penaltiesincreased prices and/or degraded termsthat Broadcom threatened to impose on the customer as to other designs and other covered products.
Broadcoms conduct deprived rivals of opportunities to work with key OEMs and service providers, thereby degrading rivals ability to obtain scale and commercial validation, improve their engineering capabilities, offer better products to customers, and position themselves to win business in the future. As a result, rivals diverted resources away from, divested from, and/or considered exiting markets for Monopolized Products.
By foreclosing rivals from substantial sales opportunities other than through competition on the merits, Broadcom has maintained its monopoly in the markets for Monopolized Products and has unreasonably restrained competition in the markets for all Relevant Products, in each case harming price and non-price competition, reducing innovation, and reducing customer choice.
No legitimate procompetitive efficiencies justify Broadcoms conduct or outweigh the substantial anticompetitive effects thereof. Any legitimate objectives of Broadcoms conduct could have been achieved through significantly less restrictive means.
III. Legal Analysis Section 5 of the FTC Act prohibits unfair methods of competition, including agreements in restraint of trade prohibited by Section 1 of the Sherman Act and monopolization prohibited by Section 2 of the Sherman Act.3 Under Section 1, a plaintiff must show 1 concerted action that 2
unreasonably restrains competition.4 A
Section 2 monopolization offense 3 15 U.S.C. 45; see, e.g., FTC v. Cement Inst., 333
U.S. 683, 69394 1948.
4 15 U.S.C. 1; see, e.g., Arizona v. Maricopa County Med. Soc., 457 U.S. 332, 34243, 1982.

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