Many large acquisitions face similar investigations, known across the EU as “phase one” investigations, which typically take several months to complete.
But the EU plans to move the probe into a more detailed “phase two” that could take more than a year and ultimately block the deal outright, people familiar with the matter said. Nvidia finally abandoned its $66 billion acquisition plan for chip design company ARM because of the EU’s long-term antitrust review.
Broadcom has yet to comment.
The company’s acquisition of VMware is one of the largest in the history of the tech industry, second only toMicrosoftThe $75 billion acquisition of Activision Blizzard.
Opponents, including some VMware customers, have written to the EU saying VMware customers may be required to bundle Broadcom services in the future.
They pointed to two recent deals that Broadcom has led, including its $18.9 billion acquisition of CA Technologies in 2018 and its $10.7 billion acquisition of enterprise security firm Symantec a year later. After both deals, the U.S. chipmaker ended up raising prices on its products, citing a risk of damaging competition.
Those concerns have been reported to senior EU officials, including EU competition commissioner Margrethe Vestager, but Broadcom is unlikely to file a merger with EU antitrust authorities before the end of the summer, people familiar with the matter said Review applications.
There is also the prospect of further regulatory scrutiny in the United States, and possible investigations into the deal by the United Kingdom and China.
Broadcom has already clashed with the European Commission over allegations of hindering competition. In October 2020, Brussels accepted the company’s commitment to ensure competition in the modem chipset market.
Under CEO Hock Tan’s leadership for more than a decade, Broadcom rose to become one of the world’s largest chipmakers through a spree of acquisitions.
Chen was banned from further consolidating the semiconductor industry in 2019 after the U.S. Federal Trade Commission (FTC) accused Broadcom of being an industry monopoly.
This has also led Chen to shift the focus of acquisitions to software and cloud computing companies, building Broadcom into a broader tech giant.
In November, the FTC banned Broadcom from requiring customers to buy bundles, so-called “exclusive” or “loyalty” agreements, when it sells semiconductors to internet-connected devices. They also banned Broadcom from “retaliation against customers who do business with its competitors.”
“Just because it involves Broadcom and it’s a huge tech deal, regulators are bound to be watching closely,” said Andy Li, an analyst at CreditSights.
Broadcom will respond aggressively to those concerns, the people said, arguing that this is not a merger between rivals, so it will not increase its market power. They also argue that the deal is unlikely to trigger price increases, lower service quality or negatively impact innovation.
Broadcom believes that the acquisition is not comparable to Nvidia’s failed acquisition of ARM, because Nvidia’s competitors rely on ARM’s licensing agreements.
But the trade group representing hundreds of VMware customers sent a letter to EU regulators this week asking them to preemptively block the deal to prevent competition from being disrupted.