Korea Fair Trade Commission (KFTC) rejected a voluntary corrective plan submitted by Broadcom Inc., which is accused of unfairly forcing South Korea’s tech giant Samsung Electronics Co. to sign long-term contracts while supplying essential smartphone parts, and said a final decision on whether Broadcom violated the law will made in a plenary meeting.

KFTC announced on Tuesday that it dismissed the plan for consent resolution prepared by four companies, including Broadcom, in connection with the abuse of their dominant market position against Samsung Electronics at a plenary meeting on June 7. This is the first time the KFTC has rejected a plan for consent resolution after taking issue with its content since it began the consent resolution procedure.

A consent resolution is a system in which a business operator suspected of violating the fair trade law proposes corrective measures, such as the restoration of the status quo and relief of damages, and if KFTC recognizes the validity of the proposal after collecting opinions, the case is quickly closed without determining whether it is illegal.

The case began in 2020 when Samsung Electronics, which had received all its Wi-Fi and Bluetooth chips from Broadcom, tried to diversify its business partners to include Qualcomm Inc. Broadcom stopped shipping parts ordered by Samsung Electronics at the time, as well as technical support for existing products.

Broadcom then demanded that Samsung sign a long-term supply agreement that would require the company to purchase more than $760 million worth of components every year for three years and pay the difference if it fell short of the amount. Samsung Electronics eventually signed a long-term parts supply contract with Broadcom. KFTC submitted a review report after completing its investigation in January last year, but in July, it began the process of consent resolution at Broadcom’s request.

The final plan for consent resolution prepared by Broadcom includes the creation of a 20 billion won ($15.79 million) win-win fund to support small- and medium-sized businesses in the semiconductor and information technology (IT) sectors, the provision of quality assurance and technical support for three years for parts purchased by Samsung Electronics, and the prohibition of forcing parts supply contracts and restricting parts selection.

“Expanding quality guarantees and technical support for Samsung Electronics is not appropriate as compensation for damage, and Samsung Electronics is not accepting such corrective measures,” said a KFTC official.

On June 7, Samsung Electronics claimed that Broadcom’s abuse of its dominant position caused it to incur additional costs of $287.54 million and excess inventory worth $38.76 million. An official from Qualcomm, a U.S. semiconductor company who reported the case, also attended as a witness, and emphasized that Broadcom intimidated Samsung Electronics to prevent it from using Qualcomm components and restrict competition. Broadcom, on the other hand, argued that the long-term contract with Samsung was voluntarily signed for mutual benefit and that it was difficult to see that Broadcom had a dominant position in the transaction.

By Lee Jin-han, Lee Sae-ha, and Yoon Yeon-hae

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