On April 12, 2023, the European Commission informed Broadcom Inc. of its preliminary view that its proposed acquisition of VMware Inc. may harm competition in the market for certain hardware components that interoperate with VMware’s virtualization software. This adds to the growing list of challenges Broadcom must quash to close its acquisition.

The EC opened an in-depth investigation in December 2022. The EC determined that Broadcom was the leading supplier of certain hardware components, including FC HBAs and storage adapters, that require access to VMware’s virtualization software to compete. As a result, the EC was concerned that Broadcom may restrict competition in these hardware markets by delaying or degrading rivals’ access to VMware's virtualization software. If this happens, then hardware customers would face higher prices, lower quality, and less innovation.

The EC’s findings mirror those of the UK Competition and Markets Authority, which recently determined that, if VMware is acquired, then Broadcom “would be able to leverage VMware’s market power in server virtualization software to weaken (“foreclose”) Broadcom’s hardware competitors.” This would reduce competition and consumer choice in those hardware markets.

As we discussed previously, it is refreshing to see antitrust agencies focus their analysis on market realities and condemn even vertical mergers where investigations reveal they may substantially harm competition in a relevant market. It will be interesting to see whether the FTC, whose investigation into this merger appears ongoing, reaches the same conclusions as the EC and CMA.