EU officials have launched an antitrust investigation into Broadcom’s $69bn acquisition of cloud software company VMware, claiming that the combined group could harm competition in the technology industry.
Though Brussels tends to probe large mergers and acquisitions, this deal, among the largest in the history of the industry, could bring more scrutiny. The transaction is the second-largest deal announced this year, second only to Microsoft’s $75bn bid for video game developer Activision Blizzard.
The European Commission “is particularly concerned that the transaction would allow Broadcom to restrict competition in the market for certain hardware components which interoperate with VMware’s software,” it said in a statement. Their “portfolios are largely complementary,” the commission said.
The EC’s primary concerns are degrading interoperability between VMware’s software and competitors’ hardware to the benefit of Broadcom’s equipment, and the foreclosing of competitor’s hardware by either barring them from using VMware software or hindering access to it.
“This, in turn, could lead to higher prices, lower quality and less innovation for business customers, and ultimately consumers,” the commission said.
Opponents of the deal have written to the EU to argue that VMware customers could be forced to buy Broadcom products, claiming that Broadcom raised prices after two acquisitions in the past several years.
In 2018 it bought CA Technologies for $18.9bn, and followed up with the 2019 acquisition of Symantec’s enterprise security business for $10.7bn.
The commission has until May 11, 2023 to make a decision based on its investigation. Further regulatory scrutiny in the US is expected as well.
Broadcom said it looked forward to “continuing our constructive work with the European Commission as part of their thorough review process”.