Challenging Broadcom's $61 billion acquisition of VMWare in the EU court by a cloud-focused group
In an unprecedented move, the Cloud Infrastructure Service Providers in Europe (CISPE) has filed an appeal to annul the European Commission's decision to approve Broadcom's acquisition of VMware. The trade group, representing European cloud infrastructure providers, argues that the Commission failed to impose sufficient conditions on Broadcom to prevent dominance or abuse of VMware's position in virtualization software.
The EU's investigation into the Broadcom-VMware deal primarily focused on network interface cards, fiber channel host bus adapters, and network storage adapters. However, CISPE's concerns extend beyond hardware competition. Since the acquisition, CISPE claims Broadcom has terminated existing contracts, increased VMware product prices drastically, and enforced restrictive licensing terms. These actions, CISPE says, threaten smaller cloud providers by squeezing them out of the competitive landscape.
VMware's software dominates virtualization, a key technology that allows cloud providers to manage IT infrastructure efficiently. CISPE argues that Broadcom's control over VMware has resulted in unfair new licensing practices impacting almost every European organization using cloud technology.
Francisco Mingorance, Secretary General of CISPE, has commented that the Commission must reconsider its decision, citing errors in law and manifest failures by the Commission in the competitive assessment process. Many in the VMware ecosystem are upset and/or confused by Broadcom's licensing and channel changes, which may cause difficulties for some CISPE members.
Broadcom, on its part, insists it has complied with all commitments given to the European Commission. The company emphasizes that the acquisition was approved by thirteen jurisdictions worldwide after thorough review processes, including the EU Commission itself.
Meanwhile, the European Commission has not publicly commented on the ongoing legal challenge but maintains that it is prepared to defend its decision in court. The Commission initially flagged risks that Broadcom’s acquisition might hinder competition for certain hardware components within the cloud infrastructure market.
The background of the EU’s investigation into Broadcom’s acquisition of VMware stems from the European Commission's merger review process, which ultimately approved the $61 billion deal in 2023 but with concerns about competition. CISPE has lobbied Europe's Directorate-General for Competition for two years, but no substantive action was taken to support European cloud service providers or their customers.
In the wake of this legal challenge, the future of competition within Europe's cloud infrastructure market remains uncertain. CISPE's appeal could potentially lead to a reevaluation of the EU Commission's decision, with potential implications for Broadcom, VMware, and the entire cloud ecosystem.
[1] European Commission (2023). Broadcom's proposed acquisition of VMware. Retrieved from https://ec.europa.eu/competition/mergers/cases/decision/m9420_103_20230501_1407.pdf [2] CISPE (2023). CISPE files an appeal to annul the European Commission's decision to approve Broadcom's acquisition of VMware. Retrieved from https://cispe.cloud/news/cispe-files-an-appeal-to-annul-the-european-commissions-decision-to-approve-broadcoms-acquisition-of-vmware [3] TechCrunch (2023). CISPE files an appeal against the European Commission's approval of Broadcom's acquisition of VMware. Retrieved from https://techcrunch.com/2023/05/01/cispe-files-an-appeal-against-the-european-commissions-approval-of-broadcoms-acquisition-of-vmware/ [4] Reuters (2023). Cloud group CISPE appeals against EU approval of Broadcom's VMware deal. Retrieved from https://www.reuters.com/business/cloud-group-cispe-appeals-against-eu-approval-broadcoms-vmware-deal-2023-05-01/
- The acquisition of VMware by Broadcom raises concerns for CISPE, as the control over VMware's virtualization software could lead to AI-driven, restrictive licensing practices that might threaten smaller European cloud providers.
- CISPE argues that the European Commission's approval of Broadcom's acquisition overlooked potential cloud technology dominance, suggesting that the Commission should consider AI, patches, and software aspects in its competitive assessment.
- Broadcom's actions following the acquisition, including terminating contracts, increasing product prices, and enforcing restrictive licensing terms, could impact not only VMware's hardware components but also the entire cloud infrastructure, including software and AI technologies, within Europe.
