Big tech used to be able to stall for time when dealing with European Union antitrust cases. The tactic may not work for much longer.
EU Competition Commissioner Margrethe Vestager is dusting off a long-dormant regulatory tool, called “interim measures,” that could force dominant companies to loosen suspect anticompetitive practices long before officials have proven their case. Her investigation into semiconductor maker Broadcom is a test case.
Officials haven’t used interim measures since 2001, when the European court established a very high threshold for their use. There must be a clear-cut abuse creating a real risk of serious and irreparable harm to rivals.
Ms. Vestager, who pledged more robust action in digital markets in her confirmation hearing Tuesday, is focused on incentives
pays to major set-top box makers for exclusively using its chipsets. As the world’s largest maker of integrated circuits for wired communication devices, the company has special responsibilities under EU law to not abuse its dominant market power.
She is currently finalizing her decision, with an announcement expected in the coming weeks. If the EU rules against Broadcom, the company will have to stop paying incentives the commission suspects are illegal—a decision it will likely appeal to the European courts.
The revival of interim measures is rooted in the rationale that today’s fast-moving markets can tip very quickly in favor of the dominant company. With antitrust investigations taking between two to seven years to complete, the decision to outlaw an abusive practice can come too late to protect competitors. While the tool could be used in any industry, the tech sector is an important focus.
One extreme example is this summer’s ruling that chip maker
used predatory pricing to drive rival Icera out of business. Once touted as a potential unicorn—a startup valued at more than $1 billion—the U.K.-based company drastically scaled back its ambitions soon after it filed an official EU complaint in 2010. The company was sold to Nvidia for $367 million the following year and shelved in 2015. Qualcomm has appealed the EU decision.
The EU’s move to sharpen its tools comes amid the recent tech backlash in the U.S., which has seen state and national agencies launching investigations and increased talk of stronger enforcement. Brussels is an antitrust thought leader, raising the specter that other competition agencies around the world, including the Justice Department and Federal Trade Commission, might borrow from its playbook.
If they face interim measures in Europe, U.S. tech companies will have to rethink their approach. There will be more incentive to cooperate with officials to clear their name and quickly remove the restrictions. Currently, delaying an investigation can only help them by prolonging the benefit from any behavior that could end up being ruled illegal.
On the plus side, companies will have an early chance to argue their case in front of a judge, because they can appeal the interim measures at the start of the investigation rather than having to wait until after the EU’s final decision.
Antitrust investigations are currently a cost of doing business for powerful companies. Soon, they could actually change how companies do business. Silicon Valley shouldn’t underestimate the difference.
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