Broadcom plans to appeal South Korean FTC fine related to Samsung contract (update) - report
Justin Sullivan
Update: The story was updated with comments from Broadcom
South Korea's Fair Trade Commission (FTC) has tentatively fined Broadcom (NASDAQ:AVGO) and affiliates 19.1B won (~$14.3M) for allegedly forcing a supply deal which was disadvantageous to Samsung Electronics (OTCPK:SSNLF), Korea JoongAng Daily reported.
"Broadcom is disappointed with the decision announced by the Korea Fair Trade Commission (KFTC) today and intends to appeal the decision to the Seoul High Court," Broadcom said in an emailed statement to Seeking Alpha
The Korean antitrust watchdog announced the decision on Thursday after a probe was started by a complaint from Qualcomm (QCOM) in 2021, the report noted.
Broadcom enforced an unfair long-term contract in 2020 which obligated Samsung to purchase $760M worth of chips from Broadcom from 2021 to 2023, the report added citing the FTC.
The agreement also required Samsung to compensate for any shortfall if it failed to buy the stated amount. Due to the unfair clauses, the contract was terminated in August 2021, according to the report.
Broadcom noted in its statement, "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."
Broadcom used to be the only supplier of telecommunication-related modules for Samsung's Galaxy phones, however things began changing in 2019 after rivals such as Qualcomm entered the market.
Following the report of Samsung diversifying its component suppliers, an unnamed CEO of Broadcom had sent a message to Samsungâs counterpart in September 2019, the report added.
The FTC revealed a part of the message which was intended to block a deal with Qualcomm, according to the report.
"Samsung Electronics was forced to forgo the component supply from another vendor for its Galaxy S21, which was released in 2021,â said FTC Chairman Han Ki-jeong in a press briefing on Thursday, as per the report. "That limited the rights to choose ideal suppliers and hampered Samsung's strategy of diversifying component suppliers, which incurred financial damages."
In response to the FTC probe, Broadcom in January proposed to create a 20B won ($15M) funding project for local technology companies and technical and quality assurance assistance for Samsung. However, Samsung and other Korean electronics companies filed a letter to the FTC to ask the regulator to compel Broadcom to reimburse damages in full, the report noted.
The antitrust agency had rejected corrective measures proposed by Broadcom in June, according to the report.
AVGO -5.48% to $785.04 premarket Sept. 21

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