Broadcom Offers Remedies To Ease EU Worries Over VMware Deal

Broadcom continues to work to convince antitrust regulators to greenlight its proposed $61 billion (£49.8bn) acquisition of virtualisation giant VMware.

Reuters reported that the US chipmaker has offered interoperability remedies in an effort to address European Union antitrust concerns.

It was back in May 2022 when Broadcom had announced its proposed VMware deal, but the acquisition soon attracted the attention of antitrust regulators around the world.

Antitrust concerns

In July 2022 for example the US Federal Trade Commission (FTC) said it would undertake a more in-depth “second look” investigation of the Broadcom-VMware deal, in line with a policy announced in September 2021.

Large tech deals have been attracting close regulatory scrutiny amidst concerns of excessive market power being concentrated in the hands of a few players.

The EU authorities also signalled their intention to examine the deal, but perhaps Boradcom’s biggest challenge has come from the United Kingdom.

In November 2022 the UK regulator – the Competition and Markets Authority (CMA) – announced it was launching an initial review of the Broadcom deal to buy VMware, over concerns the deal could substantially hurt competition in the UK.

In January 2023 the CMA announced that it had begun a Phase 1 investigation of the deal.

Then in March the CMA concluded Broadcom’s deal to buy VMware could lead to less innovation and drive up the cost of computer parts used by the UK government, banks and telecoms.

The CMA found that VMware has a leading position in server virtualisation software and that compatibility with its software is critical for the server hardware components sold by Broadcom and its rivals.

The CMA said it is concerned that the deal could enable Broadcom to harm its rivals by preventing them from being able to supply VMware-compatible hardware components – such as NICs and storage adapters – reducing competition and ultimately choice for customers.

The CMA investigation also found that the merger may result in Broadcom obtaining commercially sensitive information (such as details of new planned products) that its hardware rivals currently supply to VMware.

The CMA is concerned that this could damage innovation and leave customers worse off, including fewer product updates or new features, and it has begun a Phase two investigation.

EU compromises

Now according to Reuters citing people familiar with the matter, Broadcom has offered interoperability remedies in an effort to address European Union antitrust concerns.

Broadcom submitted its proposal on Tuesday, a European Commission filing showed. The EU competition enforcer, which did not provide details in line with its policy, extended its deadline for a decision to 17 July.

The European Commission last month said last month it was concerned that Broadcom may restrict competition in some hardware components which interoperate with VMware’s virtualisation software.

According to Reuters, Broadcom Chief Executive Hock Tan had been in Brussels earlier this month to try and convince EU antitrust enforcers that the company’s bid for VMware was beneficial to competition in the sector.

The company has hoped regulators would consider the presence of Amazon, Microsoft and Google in the cloud computing market as proof of strong competition, other people familiar with the matter told Reuters last year.

On Wednesday, Broadcom reiterated its aim of closing the VMware transaction in the 2023 fiscal year, and added it was making progress with various regulatory filings regarding this deal around the world.

“While we maintain that this deal does not present any competition issues, we have made a proposal to address fully the concerns expressed by the European Commission,” Broadcom was quoted as saying.

“The combination of Broadcom and VMware is about enabling enterprises to accelerate innovation and expand choice by addressing their most complex technology challenges in this multi-cloud era, and we are confident that regulators will see this when they conclude their review,” it added in a statement.