Broadcom's VMware acquisition: EU Commission allegedly ignored warning signs

The industry association Cloud Infrastructure Service Providers in Europe (CISPE) is intensifying its criticism of the EU Commission regarding its approval of Broadcom's 59-billion-euro acquisition of VMware. In a formal response to the General Court of the European Union (EuG), the association complains that the EU Commission failed to assess clear and publicly known risks of the transaction. These risks also arose from Broadcom's discernible incentives to monetize VMware's already existing market dominance in server virtualization software.

According to a CISPE competition analysis from October, Broadcom has repeatedly exacerbated the situation for providers and customers who rely on Broadcom's or VMware's virtualization tools to provide their services. In light of the escalating situation, the association filed an action for annulment with the EuG in July against the EU Commission's decision to approve Broadcom's acquisition of VMware.

In its statement to the court (Case T-503/25), CISPE particularly highlights Broadcom's publicly disclosed earnings targets. The CEO of the US conglomerate has publicly committed to increasing VMware's standalone EBITDA (earnings before interest, taxes, and amortization) from just under 5 billion to 8.5 billion US dollars within three years of the acquisition's completion. This represents an increase of 60 to 80 percent in a market that grows by only five to eight percent annually.

According to the association, such a leap is realistically not achievable through organic growth or efficiency improvements. It can only be achieved through aggressive monetization of VMware's captive customer base by means of drastic price increases and forced product bundling.

Antitrust review with half-closed eyes

Another central point of criticism is the financing structure: Broadcom took on approximately 28.4 billion US dollars in new debt and also assumed about eight billion US dollars in existing VMware financial obligations. According to CISPE, these substantial sums have created a strong financial incentive to extract profit from VMware's installed customer base as quickly as possible.

Despite these public statements by Broadcom management and warnings from customers and industry associations, the Commission has not taken into account the clear risks of abuse, the association writes in its submission. It criticizes that the authority has neither investigated the risk of substantial price increases and contractual customer lock-in nor imposed protective measures under EU merger control rules. Since the acquisition, these dangers have manifested in the form of sharply increased prices, forced multi-year subscriptions, and the bundling of VMware products. This has resulted in significant cost consequences for European cloud providers and their customers.

The Commission reviewed the merger "with half-closed eyes" and declared it harmless, complains CISPE Secretary General Francisco Mingorance. It has given Broadcom a blank check to lock in and exploit customers. Antitrust supervision has failed, which is now proving costly for the economy.

Complaint to the Ombudsman

CISPE's criticism also extends to the issue of time delays in the publication of decisions. The association has therefore recently filed a complaint with the EU Ombudsman, Teresa Anjinho, regarding the long duration until the publication of the Commission's final decree. Although the Commission gave the green light for the takeover on July 12, 2023, it took 672 days – almost two years – for it to publish its reasoning for the decision. During this time, according to CISPE, Broadcom has "brutally" imposed a series of exponential price increases and unfair software licensing terms.

According to the association, the months-long delay means that European companies could not appeal the approval. This is equivalent to a denial of legal recourse for all those suffering from these tactics.

The Commission defends the delay by citing the confidentiality of commercially sensitive data and the time required to coordinate the public version of the reasoning. Unlike almost all other phases of a merger decision, there are no strict deadlines for this final step. According to the complaint, this opens the door for "obvious exploitation of the system" by unethical parties.

CISPE sees this as a systemic failure, as delays of two years or more in merger decisions have become increasingly common over the past ten years. It calls on the Commission to set strict deadlines for the publication of non-confidential versions of decisions on acquisitions. Two months should be sufficient.

Should the EuG declare the approval void, this would have significant consequences for Broadcom's investment. The Commission would have to re-examine the transaction taking into account current market conditions, which would create legal uncertainty for the company's shareholders, creditors, and customers.

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