EU cloud gang challenges Broadcom's $61B VMWare buy in court
CISPE cites recent channel changes, but the deal was decided on different matters
COMMENT Trade group Cloud Infrastructure Services Providers in Europe (CISPE) has filed a formal appeal before the European General Court to seek annulment of the European Commission's decision to approve Broadcom’s acquisition of VMware.
In a statement sent to The Register, CISPE claims "errors in law and manifest failures by the Commission in the competitive assessment process … are significant enough to seek an annulment of the decision."
CISPE's statement says: "Broadcom has unilaterally terminated existing contracts – often with only weeks' notice – and imposed onerous new licensing conditions. These include drastic cost increases (sometimes exceeding tenfold) and mandatory multi-year commitments for access to essential VMware software."
The organization also takes issue with the recent reboot of VMware's channel program, which it worries could see some partners "barred from purchasing and reselling VMware-based cloud services – critical tools for delivering secure, flexible, and European cloud solutions."
CISPE's statement reveals that it made "repeated efforts … to engage constructively with Broadcom and secure fairer access terms for its members" but was "met with refusal and disregard."
The group has also lobbied Europe's Directorate-General for Competition for two years, but says “Despite numerous meetings and thorough responses to detailed requests for information, no substantive action was taken to support either European cloud service providers or their customers.”
“The Commission was warned this would happen, yet it stood by. It must now reconsider its decision,” said Francisco Mingorance, Secretary General of CISPE.
A Broadcom spokesperson said the company "strongly disagrees with these allegations. The European Commission, along with twelve other jurisdictions around the world, approved our acquisition of VMware following a thorough merger review process, and we will uphold the commitments made to the Commission at that time. We continue to bring our customers better choices and solutions to address their most complex technology challenges."
+Comment: Software was never the issue
The Register has asked CISPE to detail the errors of law it alleges, which are significant because the EC's ruling that Broadcom could acquire VMware had little to do with virtualization software, a field in which Virtzilla is the most mature vendor but faces plenty of competition.
Before the acquisition, VMware faced the likes of Microsoft, Nutanix, and XCP-NG.
Instead, the EU probe at the time mostly considered network interface cards, fiber channel host bus adapters, and network storage adapters. Broadcom makes all of those products, and most VMware customers need them because their setups include external storage arrays.
The EU's competition wonks worried about tweaks to VMware's software that would mean it only worked with Broadcom hardware. Hock Tan's chips-and-code shop assured regulators it would take steps to prevent that from happening, and the EC let the deal proceed.
That the union of member states would investigate the Broadcom/VMware deal over its impact to hardware rather than competition in virty software – with VMware's wares by far the dominant platform in server virtualization – was a situation that the Reg pointed out at the time might be missing a trick.
Many in the VMware ecosystem are upset and/or confused by Broadcom’s licensing and channel changes, which undoubtedly make life difficult for some CISPE members.
But any VMware user seeking alternatives has plenty of choices.
Nutanix remains a strong contender. Microsoft has new hybrid cloud options. HPE and Red Hat have entered the market, Citrix has returned, and a new wave of contenders like Platform9, Arcfra, and OpenNebula are making plays.
Only Nutanix, however, targets service providers of the sort that become CISPE members, so perhaps the group has a point.
A tough fight lies ahead of CISPE, because the process of having the EU revisit a merger approval is long, hard, and almost never results in a reversal. Broadcom will fight it ferociously.
The Register fancies CISPE's real goal could be to have Broadcom change some of its stances in ways that benefit its members – an outcome that seems possible given that when Broadcom recently axed the lowest tier of its channel program it did so everywhere except Europe. ®