Broadcom's VMware Acquisition Faces EU Legal Challenge Over Competition Concerns

Broadcom Inc. (AVGO.US) is facing legal scrutiny from the European Union (EU) over its $610 billion acquisition of VMware. The EU Commission had conditionally approved the deal in July, noting that Broadcom had provided a comprehensive set of commitments to ensure access and interoperability, thereby addressing potential antitrust concerns. However, the European Cloud Infrastructure Services Providers' Association (CISPE) has filed a legal challenge against the EU's approval, alleging that the deal could limit competition in the market.

CISPE, which includes members such as Amazon Web Services (AWS), argues that the EU Commission did not impose any conditions on Broadcom to prevent it from abusing its market dominance. The organization has expressed concerns that Broadcom's behavior post-acquisition, such as terminating existing contracts and imposing high-cost new licensing terms, could harm European cloud computing users. CISPE's secretary general, Francisco Mingorance, stated that the new licensing terms imposed by Broadcom could affect almost all European organizations using cloud technology, as VMware's software holds a dominant position in the virtualization market.

The EU General Court, based in Luxembourg, will hold a hearing in the near future to address these concerns and ultimately decide whether the EU Commission should re-examine its approval of the deal. The outcome of this legal challenge will have significant implications for the cloud computing industry, as the acquisition would grant Broadcom control over VMware's virtualization technology, a critical component in cloud computing infrastructure.

The legal challenge highlights the regulatory scrutiny that major mergers and acquisitions face, particularly in sectors where competition is crucial for innovation and consumer welfare. The court's ruling will determine whether Broadcom can proceed with the acquisition as planned or if additional measures are required to address the competition concerns raised by CISPE. The EU's decision to review the deal underscores the importance of ensuring a fair and competitive market in the cloud computing industry.