Regulatory opposition to the Broadcom-VMware merger grows – in the UK, Europe, the US and even in China
Summary
Last Friday, the CMA published an update on its probe into the deal and imposed a very tight deadline calling all interested parties to make submissions to the regulator. From the outset, the UK authorities, as embodied in the CMA, have been worried that the deal would slow innovation, reduce competition and push up the already accelerating costs of server software and computer components. It wrote that “in exercise of its duty”, it must determine “whether the creation of that relevant merger situation may be expected to result in a substantial lessening of competition (SLC) within any market or markets in the United Kingdom (UK) for goods or services.” It added that the merger is “subject to ongoing review by other competition authorities including in the United States, the European Union, and China”. The ‘Assessment of the Competitive Effects of the Merger’ is based substantially, but not exclusively, on the concept of the “theory of harm”, which “describes the possible ways in which a substantial lessening of competition could arise as a result of a merger.” In its earlier “Phase 1 decision”, the regulator found that the proposed merger did indeed give “rise to a realistic prospect of an SLC as a result of foreclosure of hardware competitors through leveraging VMware’s position in server virtualisation software and non-horizontal effects from commercially sensitive information sharing.” On that basis, the CMA launched an in-depth Phase 2 investigation that “does not preclude an SLC being identified on another basis following further work, or our receipt of additional evidence.” The regulator added that it will also examine the “foreclosure of hardware competitors through leveraging VMware’s position in server virtualisation software,” pointing out that “in certain circumstances, non-horizontal mergers can weaken rivalry, for example when they result in foreclosure of the merged firm’s competitors. When the deal was announced, VMware customers immediately voiced concerns for the future, citing Broadcom’s earlier, less-than-successful acquisitions of CA Technologies and Symantec.
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