US chipmaker Broadcom is to acquire VMWare for $61 billion. Among the biggest deals in the tech industry, it will come under scrutiny from US antitrust. A major takeover that also worries the European Commission. The regulator wants to ensure that Broadcom does not undermine respect for competition. It is common knowledge that the company has already taken advantage of its dominant position in the past.
One of the biggest deals in the industry
It is the second largest acquisition in the tech sector after the takeover of Activision Blizzard by Microsoft for 69 billion dollars. Broadcom is pursuing its business diversification strategy after acquiring CA Technologies for $19 billion and Symantec for $10.7 billion. A strategy that raises concerns among regulatory authorities. They fear abusive behavior on the part of the chipmaker, such as a price hike.
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Broadcom has entered into discussions with the European Commission, which is responsible for maintaining a level playing field within the European Union. With such a large amount of money involved, reviewing the transaction is a normal step. This can take several months, as when the Commission took eight months before validating the acquisition of Nuance by Microsoft for 19.7 billion dollars.
According to people close to the company, relayed by the FinancialTimes, the European Commission could go even further in examining the takeover. Broadcom has already faced the European regulator in 2020 for anti-competitive practices. The American company then made a commitment to Brussels to guarantee respect for competition. Guarantees that are probably not enough for the Commission, which knows the behavior of the company abroad.
Broadcom has already demonstrated abuse of dominance
In the United States, the company has a reputation for taking advantage of its dominant position to implement anti-competitive practices. In 2021, the Federal Trade Commission banned the company from carrying out ” retaliation against customers who do business with Broadcom’s competitors “. Opponents of the VMware takeover even wrote to the European Commission to claim that Broadcom had raised the prices of CA Technologies and Symantec products and services following their takeover.
This corporate liability amplifies the precautions taken by regulators, which will most likely delay the acquisition. This situation echoes the aborted takeover of Arm by Nvidia for significant anti-competitive risks in the graphics card sector. Broadcom’s case is not entirely similar, however, as VMWare is not a competitor and this will not lead to a strengthening of its position in the chip sector.