FTC rejects Broadcom's proposal in dispute with Samsung

Korea's antitrust agency Tuesday rejected corrective measures proposed by Broadcom to address allegations that it abused its market dominance to browbeat Samsung Electronics, opening up the door for a possible civil damages suit.

A smartphone with a displayed Broadcom logo is placed on a computer motherboard [REUTERS]

Korea's antitrust agency Tuesday rejected corrective measures proposed by Broadcom to address allegations that it abused its market dominance to browbeat Samsung Electronics, opening up the door for a possible civil damages suit.

The San Jose, California-based tech giant forced Samsung into an unfair long-term agreement that obligated it to buy $760 million worth of chips from Broadcom from 2021 to 2023, according to Korea's Fair Trade Commission (FTC).

The contract also requires Samsung Electronics to compensate for any shortfall if it fails to purchase the stated amount. Broadcom is a producer of semiconductor and infrastructure software products — such as WiFi and GPS chipsets — that are key components in smartphones, set-top boxes and other electronic products.

In response to the investigation launched by the FTC, Broadcom in January proposed to create a 20-billion-won ($15 million) funding project for local tech companies as well as technical and quality assurance assistance for Samsung Electronics in a measure that the FTC calls an agreement by resolution.

An agreement by resolution allows a dispute-prompting company to expeditiously close the case by voluntarily coming up with corrective measures and damages when the FTC passed the proposal.

However, Samsung Electronics and other Korean electronics companies submitted a letter to the FTC to call on the regulator to compel Broadcom to reimburse damages in full.

“The proposal by Broadcom includes a set of corrective measures where it vowed not to impose an unfair contract alongside with the establishment of a compliance system, creation of the 20-billion-won fund and extension of technical support for Samsung Electronics,” the FTC said in a statement.

“Based on the plenary meeting on June 7, the FTC rejected the suggested proposal," said the agency, adding that Broadcom's suggested measures are inappropriate for restoring transaction order or protecting other businesses.

Korean media outlets estimated Samsung Electronics' damages at around 400 billion won which could be sought by the Suwon, Gyeonggi-based electronics maker.

“Even if the FTC decides to fine Broadcom, the fine won’t directly go towards Samsung, given it is bound to be used as reserves for the agency or government,” said an industry source with knowledge about the antitrust dispute.

“Samsung could use the FTC ruling to make its case when seeking a damage suit,” the source said.

Samsung Electronics declined to comment on the ongoing dispute with Broadcom.

The FTC will continue the deliberation process to determine the penalties against Broadcom with the finalized ruling expected to come within this year, according to local media outlets.

BY PARK EUN-JEE [park.eunjee@joongang.co.kr]