European antitrust regulators – who torpedoed a mega-merger between Nvidia and ARM earlier this year – have frequently tangled with San Jose, Calif.-based chip giant Broadcom, calling its past behavior ‘primarily illegal’ and subjecting the company to a seven-year global deal to avoid antitrust lawsuits.
Now those same regulators would look the purchase of VMware by Broadcom, The proposed US$61 billion merger was announced by Broadcom on May 26.
Every acquisition Broadcom has made since 2015 has required approval from the European Commission, the European Union’s enforcement arm. Each of Broadcom’s acquisitions was reviewed and ultimately approved by the commission, starting with the purchase of Broadcom by Avago in 2015, then Brocade, CA and Symantec Enterprise Security.
Then, in 2019, the commission accused Broadcom of violating antitrust laws by requiring buyers to use a certain percentage of its microprocessors to qualify for deep discounts, driving prices down to ensure smaller competitors couldn’t compete on the European market for chips for modems and decoders. cable boxes.
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To avoid lawsuits, in 2020 Broadcom suspended all such contracts worldwide for seven years. To ensure its good conduct, the company must meet with regulators to demonstrate that it is respecting the agreement.
Last year, those same regulators opposed Nvidia’s deal with rival chipmaker ARM and launched a Phase 2 investigation into whether the $40 billion deal could strangle the supply of chips and force buyers into unfair deals – just as they accused Broadcom of doing in 2019.
The government’s review of the Nvidia-ARM deal – which was underway at the US Department of Justice as well as in Europe – was cited when Nvidia owner SoftBank announced the merger was complete in February .
Regarding the agreement between Broadcom and VMware, the Financial Times first announced in June that the European Commission planned to undertake a more in-depth phase two review. So far, regulators in Brussels have told CRN they have yet to take any official action on the deal.
“This transaction has not been formally notified to the Commission,” the agency said in response to an email. “If a transaction has a European dimension, it is always up to the companies to notify it to the Commission.”
Broadcom, however, appears to be ready for a lengthy review by estimating that it will close the VMware transaction before October 31, 2023.
Here’s how the European Commission has weighed its Broadcom decisions since 2015:
Broadcom and Avago
Survey dates: October 2, 2015 – November 11, 2015
Duration of the survey: A month
Report length: 29pages
Conclusion: The commission was concerned about the overlap of products the two companies were selling at the network underlay. However, he noted that while competition was weak, buyers were more mature and able to fend off anticompetitive practices.
“These customers are sophisticated market players who will be carefully evaluating other options in the event that the merged entity attempts to impose a tied or bundle sale on them, including the possible option of starting production of certain chips in-house or to support entry.”
The commission won commitments from Broadcom, urging the company to rewrite some of its existing contracts, but it did not oppose the deal.
Broadcom and Brocade
Investigation: March 17, 2017 – May 12, 2017
Duration: Two months
Report length: 67pages
Conclusion: The commission only approved the deal after obtaining commitments from Broadcom to develop and sell Fiber Channel host bus adapters (HBAs) “that is, cards with firmware used primarily in servers to interconnect the server processor with storage hard drives or solid-state drives through an FC SAN switch;” as well as commitments regarding Broadcom’s agreements with Cisco.
“To ensure there is a strong deterrent to (Broadcom) that after the transaction, no sensitive Cisco competitive information is used to the detriment of Cisco and to favor the merged entity’s FC ASIC or FC SAN switches. The implementation and monitoring of the Final Commitments will be ensured by a monitoring agent. The monitoring agent will have extensive powers to verify that firewalls and relevant measures to protect Cisco confidential information are implemented, including having full access to documents, personnel and facilities of the parties. »
Broadcom and CA Technologies
Investigation: September 12, 2018 – October 12, 2018
Duration: A month
Length ratio: 3pages
Conclusion: “After examining the notification, the European Commission has concluded that the notified operation falls within the scope of the Merger Regulation and paragraph 5(b) of the Commission notice on a simplified procedure certain concentrations under Council Regulation (EC) No 139/2004 For the reasons set out in the simplified procedure notice, the European Commission has decided not to oppose the notified operation and to declare it compatible with the internal market and with the EEA Agreement.
Broadcom and Symantec Enterprise Security Business
Start date: September 26, 2019 – October 30, 2019
Duration of the survey: A month
Report length: 12 pages
Conclusion: “There are a large number of active alternative data loss prevention software providers both globally and in the EEA. All of these vendors, including McAfee, Digital Guardian, Fidelis Cybersecurity and Venustech, as well as Forcepoint and RSA, will continue to compete effectively with the merged entity after the transaction. Finally, the evidence on file suggests that the parties are not particularly close competitors in this market. While SESB is the market leader, Broadcom is a small player in this market and its “CA Data Protection” product is a legacy solution… therefore Broadcom does not currently appear to be a significant competitive constraint in this market. »
Broadcom avoids lawsuits for anticompetitive practices
Start date: October 2018 — October 2020
Duration of the survey: Two years
Conclusion: Broadcom broke EU law by forcing six of its customers to buy a percentage of all their chips from Broadcom in order to get better prices. The deal strangled smaller manufacturers who couldn’t compete with the deep discounts offered by Broadcom, the European Commission said. As a result, Broadcom was forced to tear up those contracts across the world – except for China – and submit to a seven-year deal with checks by regulators to ensure it adhered to the agreement with regulators.
Speaking on behalf of the commission, Executive Vice President Margrethe Vestager said Broadcom had sought to throttle the European supply of chips used in TV and cable set-top boxes through six of its major customers.
“Broadcom … was abusing its dominant position by engaging in exclusivity and leveraging relationships with key customers,” European Commission Executive Vice-President Margrethe Vestager said in an October 2020 statement. “We also found that Broadcom’s (sic) conduct would cause serious and irreparable harm to competition if it was not promptly brought to an end, as competitors were about to be marginalized (sic) and driven out. of the market… We have therefore ordered Broadcom to stop this conduct, which we prima facie consider to be illegal, while our thorough investigation into the merits of the case continues.
Vestager said “Broadcom approached us with a proposal for commitments, aimed at addressing our concerns” with the commission that requires it to meet regularly with regulators to demonstrate compliance with its terms.
The agreement prevents Broadcom from requiring direct or indirect customers to purchase a percentage of their total chip supply from Broadcom. Additionally, Broadcom is prohibited from threatening to withhold a customer’s supply of chips if the customer refuses to “purchase a minimum quantity of other chipsets” from Broadcom.