The UK’s Competition and Markets Authority (CMA) said the $61 billion deal could see server prices increase, potentially warranting a more thorough investigation
The CMA is considering launch an in-depth investigation into US semiconductor specialist Broadcom’s acquisition of cloud computing firm VMware, suggesting that such a move could directly harm server competition.
Broadcom announced their takeover intentions in May last year, suggesting that the move would help them diversify the business, as well as generating approximately $8.5 billion of pro forma EBITDA within three years.
Antitrust regulators, however, were immediately suspicious that the deal would result in a loss of market competition, particularly driving up server prices for customers.
Now, the CMA have formally aired this concerns, telling Broadcom that it fears the deal will directly result in higher prices for UK businesses.
“Servers are a vital building block, functioning largely thanks to hardware products made by firms like Broadcom, working in unison with virtualisation software from firms like VMware,” said CMA Executive Director David Stewart. “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.”
The CMA said it was also concerned that Broadcom could obtain commercially sensitive information from rival companies that have a pre-existing relationship with VMware.
The regulator has given Broadcom until Monday 27 March to assuage its concerns, or else it will launch an in-depth investigation.
Broadcom says it is cooperating with the CMA to address these concerns, arguing that the deal will offer customers “increased quality, innovation, and choice”.
This is not the first time Broadcom may become stuck in a regulatory quagmire over a potential acquisition. Back in 2017, the company was attempting to purchase rival chip player Qualcomm in a deal that would have been worth $117 billion, before it was blocked by an executive order from President Donald Trump in 2018.
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