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The Commission said the deal could be directly harmful to market competition, leaving Broadcom’s hardware rivals with only limited access to crucial VMware software
VMware’s acquisition by Broadcom was first announced in May 2022, with the $61 billion megadeal immediately ringing alarm bells for various regulatory bodies.
By December that year, the European Commission was already signalling its disapproval, launching an in-depth investigation into the deal’s potential impact on market competition.
Now, the Commission has issued a formal statement outlining the results of this probe, suggesting that the deal could directly harm market competition for various hardware components.
“As a result of this in-depth investigation, the Commission is concerned that Broadcom may restrict competition in the global markets for the supply of FC HBAs [Fibre Channel Host-Bus Adapters] and storage adapters by foreclosing competitors’ hardware by delaying or degrading their access to VMware’s server virtualisation software,” said the Commission in a statement.
“Broadcom is the leading supplier of FC HBAs and storage adapters. The markets are very concentrated. If the competitors of Broadcom are hampered in their ability to compete in these markets, this could in turn lead to higher prices, lower quality and less innovation for business customers, and ultimately consumers.”
More specifically, the Commission said that the move could stifle the development of SmartNICs (Network Interface Cards) by Broadcom competitors.
They also fear that Broadcom could begin to bundle VMware software with its own, stopping to offer VMware software as a stand-alone product.
Despite these regulatory misgivings, Broadcom continues to be confident that regulators will eventually give the deal the green light, suggesting that they are aiming to close the deal in the 2023 fiscal year.
The Commission must make a final decision by 21 June 2023.
The European Commission is not the only regulatory hurdle the VMware–Broadcom deal will need to clear in the coming months to get this deal over the line.
Just last month the UK’s Competition and Markets Authority said that they were considering launching their own in-depth investigation into the deal, noting that the deal could not only drive up prices for UK businesses but also jeopardise commercially sensitive information from rival companies that have a pre-existing relationship with VMware.
The deal will also require approval from the US Federal Trade Commission, which is currently performing its own investigation into the deal.
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