The $61 billion merger between American chipmaker Broadcom and VMware could increase the cost of servers, according to Britain’s competition watchdog, who threatened to refer the matter to an in-depth investigation if its concerns weren’t addressed. Last year, Broadcom decided to purchase the cloud computing and virtualization business to expand into enterprise software.

The deal, according to Britain’s Competition and Markets Authority (CMA), could stifle innovation and raise the price of server hardware and software.

“Servers are a vital building block, functioning largely thanks to hardware products made by firms like Broadcom, working in unison with virtualisation software from firms like VMware,” said CMA Executive Director David Stewart.

“We are concerned this deal could allow Broadcom to cut out competitors from the supply of hardware components to the server market and lead to less innovation at a time when most firms want fast, responsive, and affordable IT systems.”

The regulator stated that Broadcom had five working days to allay its worries before it would decide whether or not to refer the deal to a thorough investigation within another five days.

Broadcom stated that it was collaborating positively with the CMA and was confident that any issues would be resolved.

“We will demonstrate that the transaction enhances competition and benefits businesses and consumers through increased quality, innovation and choice,” a spokesperson said in a statement.

“The combination of Broadcom and VMware is about enabling enterprises to accelerate innovation and expand choice by addressing their most complex technology challenges in this multi-cloud era, and we are confident that regulators will see this when they conclude their inquiry.”

According to Reuters, the European Union is planning to issue an antitrust warning regarding the deal. By June 21, the EU competition enforcer will have decided after declining to comment on the report.

\(Adapted from FinancialPost.com)

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