UK authorities open preliminary probe into Broadcom's VMware acquisition

The United Kingdom's Competition and Markets Authority has opened a preliminary probe into Broadcom's planned acquisition of VMware.

A Monday announcement by the Authority states the probe will consider whether the transaction represents a "relevant merger situation" under the terms of the Enterprise Act of 2002 and, if so, "whether the creation of that situation may be expected to result in a substantial lessening of competition within any market or markets in the United Kingdom for goods or services."

The Act offers a two-pronged test to identify a "relevant merger situation":

• The value of the turnover in the UK of the enterprise being taken over exceeds £70 million (the "turnover test"); or
• The merger would result in the creation or enhancement of at least a 25 percent share of supply of goods or services in the UK, or in a substantial part of the UK (the "share of supply" test).

A combined VMware and Broadcom almost certainly meets both thresholds with the virtualization giant's core private cloud stack alone. The Authority's call for input from interested parties therefore seems to be an opportunity for discussion of whether the deal will harm markets.

That may be a hard case to make in VMware's core server virtualization market. While Virtzilla is often criticized for charging high prices, plenty of open source and proprietary alternatives are available.

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As other regulators have considered the deal, Broadcom has run the argument that VMware's multi-cloud management tools improve competitiveness of the cloud computing market, regardless of who owns them.

The overlap between VMware's security portfolio and Broadcom's products inherited from Symantec and CA could be represented as a nastier market concentration – although, again, alternatives are not hard to find.

If the Authority decides the Broadcom/VMware deal is indeed a "relevant merger situation", a public interest test applies if the transaction is found to have implications for national security, financial stability, media plurality or to combat a public health emergency.

The Register cannot imagine the circumstances in which Broadcom buying VMware would meet those tests.

The Act does include allowances for intervention on cryptographic technology – but not the sort of stuff offered by either VMware or Broadcom.

Broadcom has described the probe as expected, unworrying, and unlikely to derail its ambition of closing the deal by late 2023. ®