Britain’s competition regulator says US chipmaker Broadcom’s $69bn takeover of cloud software company VMware could make computer servers more expensive, warning it may launch an in-depth investigation if the problem is not addressed.
The Competition and Markets Authority said on Wednesday that the acquisition, which if approved would be the largest in Broadcom’s history, could “lead to less innovation and increase the cost of computer components and software” used by governments, banks and telecommunications.
British regulators said they were considering an in-depth investigation into the relationship after finding it could harm competition, in the potential path to a blockbuster deal announced last year. The tie-up is also being scrutinized by competition enforcers in the US and Europe.
Broadcom has five working days to address the CMA’s concerns, after which the UK regulator will decide whether to refer the relationship for a deeper examination.
The acquisition is the latest combination of technologies to be explored by the CMA. Last month, it was revealed that Microsoft’s $75bn acquisition of Activision Blizzard would harm competition for British players, and proposed a sale of the blockbuster. Call from duty franchise.
Broadcom agreed to buy VMware last May as part of a push to transform the semiconductor group into a diversified technology company ranging from chips to cloud computing services.
Hock Tan, the Malaysian-American billionaire who heads Broadcom has been chasing bids for various businesses after his takeover of chipmaker Qualcomm was thwarted in 2018 by then-president Donald Trump over national security concerns.
On Wednesday, the CMA said the Broadcom-VMware tie-up could make computer servers more expensive for UK businesses.
“Broadcom kab [could] Cut out competition from the supply of hardware components for the server market and lead to less innovation at a time when most companies want fast, responsive and affordable IT systems”, said David Stewart, executive director at CMA.
The regulator said Broadcom could gain commercially sensitive information that its hardware competitors now provide to VMware as a result of the deal, adding it could also stifle innovation and make customers worse off, including fewer product updates or new features.
“It is now up to Broadcom to respond to our concerns or face a more in-depth investigation,” said CMA’s Stewart.
Broadcom said it was confident it would address CMA’s concerns, adding that the deal was “about enabling companies to accelerate innovation and expand options by addressing the most complex technology challenges of this cloud era”.
The US chipmaker said it still hopes to close the deal in the 2023 financial year, having already secured merger approvals in countries including Australia, Brazil and Canada.
The European Commission will make a decision on the bond on June 21.