European antitrust regulators have opened an in-depth investigation into U.S. chipmaker Broadcom's proposed $61 billion bid for cloud computing company VMware, the European Commission said in a statement on Tuesday.
"The Commission is particularly concerned that the transaction would allow Broadcom to restrict competition in the market for certain hardware components which interoperate with VMware's software," the Commission said in a statement.
Reuters reported on Dec. 9 that the Commission was set to open a full-scale investigation into the deal, the second biggest globally so far this year.
The Commission said its preliminary investigation indicates the transaction may allow Broadcom to restrict competition for the supply of certain components by degrading interoperability between VMware software and competitors' hardware to the benefit of its own hardware.
This and other factors could lead to higher prices, lower quality and less innovation for business customers, and ultimately consumers, the Commission said.
The Commission now has 90 working days, until May 11, 2023, to take a decision.
The proposed acquisition underlines Broadcom's ambition to diversify intoenterprise software, but comes as regulators worldwide ramp up scrutiny of deals by Big Tech.
Broadcom had been banking on early EU approval of the deal by pointing to competition from Amazon, Microsoft and Google in the cloud computing market, people familiar with the matter told Reuters in October.
Broadcom said earlier this month that it was confident the deal would close and be completed in its fiscal 2023.
Beltug, a Belgian association of CIOs & Digital Technology leaders, and its counterparts France's Cigref, CIO platform Nederland and VOICE Germany have previously voiced concerns that the deal could lead to drastic price hikes and tougher commercial practices against customers.