📋 Tender Overview
The European Commission has approved under the EU Merger Regulation the proposed acquisition of VMware by Broadcom. The approval is conditional upon full compliance with the commitments offered by Broadcom.Todays decision follows an in-depth investigation of the proposed acquisition. Broadcom is a hardware company that offers among other products Fibre Channel Host-Bus Adapters FC HBAs storage adapters and Network Interface Cards NICs which are hardware components that connect servers to storage or network. Broadcom has recently started expanding into software markets mainly for security and mainframe applications. VMware is a software supplier offering mainly virtualization software that interoperates with a wide range of hardware including FC HBAs storage adapters and NICs.The Commissions investigationThe Commissions preliminary market investigation found that by acquiring VMware Broadcom could have restricted competition in the markets for the supply of NICs FC HBAs and storage adapters.The Commissions in-depth investigation confirmed that the transaction as initially notified would harm competition in the worldwide market for the supply of FC HBAs. At the same time it ruled out possible competition concerns related to i the market for the supply of NICs and storage adapters ii the market for the development of SmartNICs and iii the bundling of Broadcoms virtualisation software with VMwares.In particular the Commission found thatBroadcom would have the ability and incentive to foreclose Marvell the only rival on the market for the supply of FC HBAs by restricting or degrading the interoperability between VMwares server virtualisation software and Marvells hardware. This would hamper Marvells ability to compete in a market where Broadcom is dominant or at least holds a very strong position ultimately leading to higher prices lower quality and less innovation for business customers.Broadcom does not hold a strong position in the market for storage adapters and NICs and will continue to face competition from several rival suppliers.Broadcom would have no economic incentive to hinder the development of SmartNICs by other providers by decreasing VMwares involvement in Project Monterey an ongoing cooperation with three other SmartNICs sellers NVIDIA Intel and AMD Pensando as such foreclosure would not be profitable.Broadcom would not be able to bundle VMwares virtualisation software with its own software namely mainframe and security software as such products are purchased by different divisions in a customer organization andor at different points in time.The remediesTo address the Commissions competition concerns in the worldwide market for the supply of FC HBAs Broadcom offered the following comprehensive access and interoperability commitments to Marvell and to any potential future entrantGuaranteed access to the interoperability Application Programming Interfaces as well as to the materials tools and technical support necessary for the development and certification of third-party FC HBAs. It also committed to ensuring i their interoperability with VMwares server virtualisation software and ii third parties access to this information at the same time as Broadcom.Guaranteed access to the source code for all of Broadcoms current and future FC HBA drivers through an irrevocable open source license. This would allow Marvell and any potential entrant to ensure interoperability with VMwares server virtualisation software and allow them to reuse and modify Broadcoms drivers for its own use.Furthermore Broadcom committed to implementing an organisational separation between the team working on Broadcoms FC HBAs and the team in charge of third-party certification and technical support. It also committed to ensuring protection of confidential information of Marvell and any potential entrant obtained in the context of the interoperability and certification processes.The Commission carefully investigated the effectiveness of the remedies collecting views from Marvell as well as server manufacturers which are the main direct customers of FC HBAs. In view of the positive feedback from market participants the Commission concluded that the proposed acquisition as modified by the commitments would no longer raise competition concerns and would maintain competition on the market for FC HBAs.The Commissions decision is conditional upon full compliance with the commitments which will be in place for ten years. Under supervision of the Commission an independent trustee will be in charge of monitoring compliance with the commitments. Moreover a fast-track dispute resolution mechanism in case of disagreement between the parties will further ensure the commitments effective implementation.Companies and productsBroadcom is a US based hardware company active in the production of NICs FC HBAs and storage adapters amongst other products. NICs are server components that provide an interface between the server and other computers and equipment on a network. FC HBAs are storage adapters that connect servers to storage located outside the server on a storage-area network using the fibre channel protocol typically through a switch. Storage adapters connect servers central processing units to storage directly. Broadcom recently started expanding into software markets notably through the acquisition of CA Technology and Symantec.VMware is a US based software company that mainly offers virtualisation software which enables IT operators to create virtual versions of computer resources e.g. hardware operating systems storage devices or network resources known as virtual machines. This enables IT organizations to run more than one virtual system and multiple OS and applications on a single server at the same time.
