Broadcom’s $61 Billion Deal with VMware Under Fire in EU

The Cloud Infrastructure Services Providers in Europe (CISPE), an industry group backed by major cloud players including Amazon Web Services, has filed a formal complaint at the EU General Court, arguing that regulators failed to impose safeguards to prevent potential anti-competitive behavior following the merger. According to Bloomberg, CISPE contends that the Commission overlooked warnings about Broadcom’s post-merger conduct, leaving European cloud users vulnerable to what it describes as “abusive” licensing terms.

At the heart of the dispute is VMware’s virtualization software — a critical component in cloud computing that allows multiple operating systems to run on a single server. Following the completion of the deal in November 2023, Broadcom gained control of this key technology. CISPE alleges that Broadcom has since exploited this dominance by inflating prices and enforcing restrictive licensing rules, thereby limiting competition and harming cloud infrastructure providers across Europe.

Per Bloomberg, Francisco Mingorance, Secretary General of CISPE, emphasized the potential impact on nearly all European organizations relying on cloud technology, citing Broadcom’s alleged new terms as a chokepoint for innovation and competition.

Related: EU Launches Probe into Broadcom’s VMware Tactics

The European Commission had cleared the acquisition in December 2023, stating that Broadcom had offered a “comprehensive” set of access and interoperability commitments aimed at addressing potential antitrust issues. These included assurances that VMware’s software would remain compatible with rival hardware systems. The approval followed similar regulatory clearances in other major jurisdictions including the UK, Japan, South Korea, China, and the United States.

However, CISPE argues that those commitments have not translated into fair business practices on the ground. The group maintains that Broadcom’s post-deal changes — including the elimination of existing agreements and the introduction of higher-cost licensing models — have disrupted service providers and end-users alike.

In response, Broadcom, headquartered in Palo Alto, California, issued a statement saying it “strongly disagrees” with the allegations. As reported by Bloomberg, the company defended the transaction’s approval, pointing out that it was authorized by regulators in over a dozen markets worldwide after extensive scrutiny, and reiterated its intention to honor commitments made to the European Commission.

The case now heads to the EU General Court in Luxembourg, where judges will consider whether the Commission’s original decision should be re-evaluated. A hearing date has not yet been announced.

Source: Bloomberg