The EU is investigating Broadcom’s $61 billion deal to buy VMware

The European Union plans to carry out a full-scale investigation of Broadcom’s $61 billion bid to buy VMware. Following a preliminary probe, the European Commission, the bloc’s executive branch, announced on Tuesday it believes the proposed acquisition may allow Broadcom to “restrict competition” in the markets for network interface cards, fiber channel host-bus adapters and storage adapters.

Specifically, the EU is concerned Broadcom may harm competition in those markets by limiting interoperability between rival hardware and VMware’s server virtualization software. It also worries the company could either prevent or degrade access to VMware’s software. The European Commission warns those actions “could lead to higher prices, lower quality and less innovation for business customers, and ultimately consumers.”

The Commission will also investigate whether Broadcom could hinder rivals like NVIDIA and Intel from developing their own smart network interface cards. Here it points to VMWare’s involvement in Project Monterey, an industry-wide effort the company announced in 2020. “Broadcom may decrease VMware’s involvement in Project Monterey to protect its own NICs revenues,” the Commission notes. “This could hamper innovation to the detriment of customers.” Another concern is that Broadcom could start bundling VMware’s virtualization software with its own mainframe and security tools, a move that would reduce choice in the market.

As one of the larger tech acquisitions of 2022, Broadcom’s bid to buy VMware was certain to draw scrutiny. The European Commission won’t necessarily block the deal, but the investigation could significantly delay the transaction and force concessions out of Broadcom. With today’s announcement, the Commission has 90 working days or until May 11th, 2023, to make a decision. If the deal were to fall through, it would be a bitter repeat of Broadcom’s 2018 attempt to buy chipmaker Qualcomm. While the circumstances and concerns were different, the company was forced to abandon the takeover after the Trump administration blocked the transaction.