European cloud trade group says EU should have blocked VMware-Broadcom merger

A trade group of European cloud providers has laid into the European Commission's decision to allow the VMware-Broadcom merger to go ahead, alleging that it failed to assess the infrastructure and semiconductor company's incentives to massively raise prices on customers.

Cloud Infrastructure Services Providers in Europe (CISPE) has issued a formal response to the General Court of the European Union after filing an action in July.

In its reply to the General Court, CISPE argued in a statement that Broadcom's aim to increase EBITDA by 60 to 80 percent in three years in a market growing 5-8 percent annually could only be achieved through "aggressive monetization of VMware's locked-in customer base through steep price rises and forced bundling."

It thereby created "a powerful financial incentive to extract cash rapidly from VMware's installed base," CISPE said.

CISPE argued that, in retrospect, the EC failed to examine this risk, despite warnings from customers and industry associations, and public statements by Broadcom's management.

Francisco Mingorence, secretary general of CISPE, said, "The Commission looked at this merger through half-closed eyes and declared it safe. By rubber stamping the deal, Brussels handed Broadcom a blank check to raise prices, lock in and squeeze customers. Broadcom has, predictably cashed this cheque with interest. This was a failure of oversight by the regulator with real world costs for Europe's cloud sector and every organization that depends upon it."

The Register has asked the Commission for a response. In an earlier statement, it had no specific comment, other than that it would defend its earlier decisions in court.

In July, CISPE filed an action seeking an annulment of the Commission's decision to approve Broadcom's acquisition of VMware in 2023. It claimed there were "errors in law and manifest failures by the Commission in the competitive assessment process which are significant enough to seek an annulment of the decision."

The European Commission launched an investigation into the merger in 2022.

CISPE said that although it did not raise its concerns at the time, it knows of a number of customers and customer groups who did. "The Commission was clearly warned by several parties, that Broadcom would most likely leverage VMware's dominance of virtualisation software to increase prices and lock in customers."

"CISPE was not involved in 2022; we were made aware of the issue as members began to get letters at the end of 2023 cancelling their existing contracts," a spokesperson said.

Separately, Broadcom has faced a number of court allegations over its licensing practices. In September, UK supermarket giant Tesco launched an action for breach of contract pertaining to its VMware licenses, and named Computacenter as a co-defendant. US telco AT&T made a very similar complaint in September 2024.

In March, VMware filed a lawsuit against Siemens over alleged unlicensed use of its software. ®