The UK’s competition regulator could launch a deeper probe into a proposed $69 billion Broadcom deal to acquire VMware, after raising concerns the tie-up could hurt innovation and hike costs for computer components and servers.
In a statement, the Competition and Markets Authority (CMA) warned it will launch a phase two investigation unless Broadcom offers legally binding proposals to address its concerns within five working days.
The CMA would then take five days to decide if the proposals went far enough to avoid a stage two probe.
It explained a phase one investigation looked into how the US chipmaker’s buy out of VMware may impact the supply of software and hardware products, and whether it gave Broadcom the ability to disadvantage competitors.
The CMA asserted VMware holds a leading position in server virtualisation software and compatibility, with its software critical for server hardware components sold by Broadcom and its rivals.
To that end, the CMA is concerned the deal could enable Broadcom to harm rivals by preventing them from being able to supply VMware-compatible hardware components.
It also said the merger could result in Broadcom obtaining commercially-sensitive information, such as details of planned new products which hardware rivals currently supply to VMware, damaging innovation and leaving “customers worse off”.
CMA executive director David Stewart added the deal could allow Broadcom to cut out competitors at a time when most companies “want fast, responsive and affordable IT systems”.
Broadcom’s deal to acquire VMware is also facing probes by the US Federal Trade Commission and the European Commission.