The Commission believes that the deal will allow Broadcom to foreclose other distributor's hardware by restricting them from accessing VMware's server virtualisation software and it may degrade interoperability between VMware's server virtualisation software and other suppliers’ hardware
EC to undertake in-depth probe into Broadcom, VMware deal. (Credit: en:User:Coolcaesar/ Wikimedia Commons)
The European Commission (EC) has launched an in-depth phase 2 investigation into the previously announced American semiconductor manufacturer Broadcom’s $61bn acquisition of cloud computing and virtualisation technology firm VMware.
The concern of the regulator is that the proposed deal would enable Broadcom to stifle competition in the market for certain hardware components that interoperate with the software of VMware.
In its preliminary investigation, the EC concluded that the deal will impact competition for the supply of network interface cards (NIC), fibre channel (FC) host bus adapters (HBA), and storage adapters.
The Commission believes that the deal will allow Broadcom to degrade interoperability between VMware’s server virtualisation software and other suppliers’ hardware to promote its own hardware.
Furthermore, Broadcom may foreclose rivals’ hardware by restricting them from accessing VMware’s server virtualisation software, stated the EC. This is said to lead to increased prices, lower quality, and less innovation for distributors of hardware, which could eventually affect the consumers.
EC Executive Vice-President Margrethe Vestager, in charge of competition policy, said: “Broadcom, a major supplier of hardware components, is acquiring VMware, a key server virtualisation software provider. Our initial investigation has shown that it is essential for hardware components in servers to interoperate with VMware’s software.
“We are concerned that after the merger, Broadcom could prevent its hardware rivals to interoperate with VMware’s server virtualisation software. This would lead to higher prices, lower quality and less innovation for customers and consumers.”
The regulator has also stated that it will examine whether Broadcom will obstruct the development of SmartNICs by other suppliers. Besides, the EC will probe if Broadcom could begin integrating VMware’s virtualisation software with its own software to no longer offer it as a stand-alone product.
The Commission has set itself a deadline of 11 May 2023 to take a decision on the proposed acquisition.
The cash-and-stock deal between Broadcom and VMware was announced in May 2022.