The CMA warned that the VMware deal could lead to higher server prices for businesses in the United Kingdom, as Broadcom will be able to bargain down prices with its competitors. This could mean a significant cost increase for U.K. businesses using servers from companies such as Dell and HP, who rely on Broadcom products to power their operations.
The CMA, an industry trade group, is reportedly concerned about a proposed deal between Broadcom and Qualcomm that could allow the latter company to cut out competitors from the supply of hardware components to the server market. If approved, this deal could lead to reduced innovation and price gouging in an already competitive space. Broadcom has until February 20th to respond to these concerns or face further investigation.
Some experts feel that the CMA’s alarmist claims may have a bit of evidence to back them up. Namely, they point out that VMware has long been an enemy of Broadcom, and the two companies have been locked in a fierce competition for years. If Broadcom were able to dominate the server space by preventing its rivals from supplying necessary parts to VMware virtual machines, it would likely result in higher prices for customers and less choice.
The CMA is concerned about Broadcom’s business practices and is looking into the company’s compliance with antitrust laws. If Broadcom fails to respond to these concerns within five days, the CMA may move on to Phase 2 of their investigation, which would look more closely into their allegations.
The European Union is continuing its investigation into the implications of Disney’s proposed purchase of Fox assets, amid concerns that the deal would lead to reduced competition and higher prices for consumers.
“Broadcom, a major supplier of hardware components, is acquiring VMware, a key server virtualization software provider. Our initial investigation has shown that it is essential for hardware components in servers to interoperate with VMware’s software. We are concerned that after the merger, Broadcom could prevent its hardware rivals to interoperate with VMware’s server virtualization software. This would lead to higher prices, lower quality and less innovation for customers and consumers,” EU’s executive VP in charge of competition policy, Margrethe Vestager said in a statement at the time.
The merger of VMware and Broadcom is a concern for EU’s competition policy because it could lead to monopoly control over the market for server virtualization software. This would suffocate innovation, hurt customer satisfaction, and drive up prices.
The Broadcom deal has prompted concern from authorities as its terms violate a number of antitrust laws. However, the company is still working with them to address their concerns and expects to close the deal this year.
The company spokesperson reassured stakeholders that their merged company will be beneficial to consumers. Through increased competition and quality, they expect to see better products and innovations on the market. Their various filings around the world show they are making good progress in getting regulatory clearance, which is a sign that their merger will go smoothly.
If this acquisition goes through, it will mark the biggest merger yet in the transportation sector. Both companies are well known for their innovative technology and aggressive marketing campaigns. While the deal may be beneficial for both parties, regulators around the world will likely scrutinize it for any potential antitrust concerns.
