UK competition authority is concerned about the $61B Broadcom-VMware deal
The U.K. Competition and Markets Authority (CMA) expressed concern today that the $61 billion Broadcom-VMware deal announced last year could result in more expensive servers for U.K. businesses.
“We are concerned this deal could allow Broadcom to cut out competitors from the supply of hardware components to the server market and lead to less innovation at a time when most firms want fast, responsive, and affordable IT systems. It’s now up to Broadcom to respond to our concerns or face a more in-depth investigation,” CMA executive director David Stewart said in a statement.
Specifically the CMA is worried that combining the hardware that Broadcom sells with the server virtualization capabilities of VMware could result in Broadcom “harming 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.” They believe that in turn could, that could also result in higher prices.
The CMA has given Broadcom just five days to respond to these concerns. If they fail to do so, the CMA could potentially pass this on to Phase 2 investigation, which would look more carefully into the issues surfaced in the initial findings.
This is only the latest probe into this mega deal. In December, the EU announced that it too had similar concerns about the impact of the combined companies on competition and was investigating further.
“Broadcom, a major supplier of hardware components, is acquiring VMware, a key server virtualization 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 virtualization software. This would lead to higher prices, lower quality and less innovation for customers and consumers,” EU’s executive VP in charge of competition policy, Margrethe Vestager said in a statement at the time.
Broadcom issued a statement today that it still expects the deal to close this year, and it’s working with authorities to address their concerns.
“We are working constructively with the CMA as it continues its standard merger review process and are confident we will address any concerns. We will demonstrate that the transaction enhances competition and benefits businesses and consumers through increased quality, innovation and choice. We are making progress with our various regulatory filings around the world, having received legal merger clearance in Australia, Brazil, South Africa and Canada,” a company spokesperson told TechCrunch.
It’s not clear if these regulatory bodies will ultimately try to stop the deal, but it’s remarkable how closely their concerns mirror one another.