PARIS (Reuters) -European antitrust regulators have opened an in-depth investigation into U.S. chipmaker Broadcom’s proposed $61 billion bid for cloud computing company VMware, the European Commission said on Tuesday.
“The Commission is particularly concerned that the transaction would allow Broadcom to restrict competition in the market for certain hardware components which interoperate with VMware’s software,” the Commission said in a statement.
Reuters reported on Dec. 9 that the Commission was set to open a full-scale investigation into the deal, the second biggest globally so far this year.
The Commission said its preliminary investigation indicates the transaction may allow Broadcom to restrict competition for the supply of certain components by degrading interoperability between VMware software and competitors’ hardware to the benefit of its own hardware.
This and other factors could lead to higher prices, lower quality and less innovation for business customers, and ultimately consumers, the Commission said.
The Commission now has 90 working days, until May 11, 2023, to take a decision.
Broadcom on Tuesday reiterated that it continued to expect the transaction would close in its fiscal year 2023, adding it would continuing to work with the European Commission.
It said it was making progress with regulatory filings around the world, having received legal merger clearance in Brazil, South Africa, and Canada and foreign investment control clearance in Germany, France, Austria, and Italy.
“The combination of Broadcom and VMware is about enabling enterprises to accelerate innovation and expand choice by addressing their most complex technology challenges in this multi-cloud era, and we are confident that regulators will see this when they conclude their review,” it said in a statement.
The proposed acquisition underlines Broadcom’s ambition to diversify into enterprise software, but comes as regulators worldwide ramp up scrutiny of deals by Big Tech.
Broadcom had been banking on early EU approval of the deal by pointing to competition from Amazon, Microsoft and Google in the cloud computing market, people familiar with the matter told Reuters in October.
Beltug, a Belgian association of CIOs & Digital Technology leaders, and its counterparts France’s Cigref, CIO platform Nederland and VOICE Germany have previously voiced concerns that the deal could lead to drastic price hikes and tougher commercial practices against customers.
(Reporting by Foo Yun Chee, Editing by GV De Clercq and Louise Heavens)