Chipmaker Broadcom’s proposed $61 billion takeover of cloud computing firm VMware suffered a major blow on Wednesday when the European Commission said that the merger could restrict competition in the hardware component market.

The Commission has delivered the findings of an investigation opened in December 2022, concluding that the deal may restrict competition in Network Interface Cards (NICs), Fibre Channel Host-Bus Adapters ‘FC HBAs) and storage adapters.

The Commission also stated concerns that Broadcom may hinder the development of SmartNICs by other providers, and start bundling VMware's virtualisation software with its own software and by extension no longer offer VMware's virtualisation software as a stand-alone product.

In a press release, the Commission said: “The markets are very concentrated. If the competitors of Broadcom are hampered in their ability to compete in these markets, this could in turn lead to higher prices, lower quality and less innovation for business customers, and ultimately consumers.”

For its part, Broadcom has continued to state its confidence that the deal will close in the 2023 fiscal year and that regulators will ultimately back the takeover.

Following the publication of this statement of objections, Broadcom now has the opportunity to reply and request an oral hearing.

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