Broadcom’s acquisition of VMware hit another snag with the EU opening an investigation into the proposed deal.
Broadcom and VMware reached a $61 billion deal in May 2022 that would see Broadcom purchase the virtualization company. The deal immediately sparked concern for VMware’s future, given Broadcom’s reputation for slashing expenses and forcing its subsidiaries to run incredibly lean operations.
In November 2022, the UK’s Competition and Markets Authority (CMA) announced an investigation into the deal, and now the EU Commission has announced its own investigation.
“Broadcom, a major supplier of hardware components, is acquiring VMware, a key server virtualisation software provider,” said Margrethe Vestager, Executive Vice-President in charge of competition policy. “Our initial investigation has shown that it is essential for hardware components in servers to interoperate with VMware’s software. We are concerned that after the merger, Broadcom could prevent its hardware rivals to interoperate with VMware’s server virtualisation software. This would lead to higher prices, lower quality and less innovation for customers and consumers.
In particular, the Commission is worried that Broadcom may scale back some of the services that VMware offers to third-party companies, choosing to bundle them with its own hardware exclusively.
Given the scrutiny tech acquisition have been under of late, the likelihood of Broadcom’s deal moving forward in the face of two separate investigations is certainly in question.
Amazon has reached an agreement with the EU to make major changes to its business in exchange for heading off antitrust probes.
Amazon was under fire for dealing unfairly with third-party sellers, preferring its own retail business over those of competitors, as well as for using its sellers’ non-public data to fine-tune its own services and gain an advantage.
The EU Commission outlined its concerns in a statement:
In July 2019, the Commission opened a formal investigation into Amazon’s use of non-public data of its marketplace sellers. On 10 November 2020, the Commission adopted a Statement of Objections in which it preliminarily found Amazon dominant on the French and German markets, for the provision of online marketplace services to third-party sellers. It also found that that Amazon’s reliance on marketplace sellers’ non-public business data to calibrate its retail decisions, distorted fair competition on its platform and prevented effective competition.
In parallel, on 10 November 2020, the Commission opened a second investigation to assess whether the criteria that Amazon sets to select the winner of the Buy Box and to enable sellers to offer products under its Prime Programme, lead to preferential treatment of Amazon’s retail business or of the sellers that use Amazon’s logistics and delivery services.
As part of the agreement, Amazon will no longer use non-public data from its sellers to improve its own products. The company will also make offers and products from competing sellers equally visible in its “Buy Box.” The terms of the deal will be enforced for seven years, but will only be in effect within the EU.
“Today’s decision sets new rules for how Amazon operates its business in Europe,” said Margrethe Vestager, Executive Vice-President in charge of competition policy. “Amazon can no longer abuse its dual role and will have to change several business practices. They cover the use of data, the selection of sellers in the Buy Box and the conditions of access to the Amazon Prime Programme. Competing independent retailers and carriers as well as consumers will benefit from these changes opening up new opportunities and choice.
Intel may have won its case to overturn a €1 billion fine antitrust fine in the EU, but the chipmaker is now pressing for interest to be paid.
In January 2022, the EU’s second-highest court overturned a €1 billion fine imposed on Intel in 2009. The EU Commission accused Intel of trying to use rebates and other incentives to block manufacturers from using chips from rival AMD. Intel was ordered to pay the fine before it was reversed 12 years later.
Intel now wants the Commission to pay it $624 million in interest, according to Reuters. The EU Court did address interest last year, saying the Commission would need to pay default interest for fines that have been overturned and reimbursed. What’s more, the court said late payments on interest would incur further interest.
It’s been a rough few days or the EU’s antitrust regulators. Last week the same court overturned a $1 billion fine against Qualcomm, criticizing regulators’ handling of the case.
As we wrote in our coverage of that story, Competition Commissioner Margrethe Vestager will likely need to be more careful in how she and her regulators go after tech companies and build cases against them.
Qualcomm scored a major win, with an EU court striking down a $1 billion fine against it and criticizing the EU Commission’s original ruling.
Lead by Competition Commissioner Margrethe Vestager, EU antitrust regulators fined Qualcomm $1 billion, alleging the company paid Apple billions of dollars in an effort to shut Intel out of the mobile chip market and ensure the Cupertino company used its chips exclusively. According to Reuters, not only did the EU’s second-highest court, the General Court, overturn the fine, it also criticized how Vestager and the Commission handled their case.
“A number of procedural irregularities affected Qualcomm’s rights of defence and invalidate the Commission’s analysis of the conduct alleged against Qualcomm,” judges said.
“The Commission did not provide an analysis which makes it possible to support the findings that the payments concerned had actually reduced Apple’s incentives to switch to Qualcomm’s competitors in order to obtain supplies of LTE chipsets for certain iPad models to be launched in 2014 and 2015,” they said.
The Commission could still appeal the decision to the EU’s highest court, the EU Court of Justice, but no decision has been made.
This isn’t the first setback for Vestager. In July 2020, EU courts upheld Apple’s Ireland tax deal, something Vestager had tried to put a stop to. Similarly, as Reuters points out, in January a court overturned a 1.06 billion euro fine against Intel for trying to squeeze AMD out of the market.
Vestager has made a name for herself as a tough, no-nonsense regulator of Big Tech. Given these setbacks, however, she may have to be more cautious and thorough in how she pursues future cases.
The EU may be taking aim at Big Tech over antitrust concerns, but the bloc doesn’t yet have concerns about cloud providers.
The cloud market has numerous companies vying for market share, but the top three — AWS, Microsoft Azure, and Google Cloud — control the lion’s share of the market. Despite the three companies dominating the market, EU antitrust chief Margrethe Vestager says there’s not been any major concerns.
Vestager credits Gaia-X, a project aimed at bolstering the EU’s independence from Silicon Valley, with creating a relatively healthy market.
“This is not something that we are engaged in, but I basically see it as pro-competitive when you have someone to show potential customers that there are more than two giants where you can place your business,” she said.
Vestager’s response is interesting, especially since Microsoft has already been hit with an antitrust complaint in the EU from other cloud providers. Vestager’s comments may indicate the complaint is not likely to gain much traction.
The European Union has unveiled sweeping measures to crack down on Big Tech and increase competition across the industry.
The EU has unveiled the Digital Markets Act (DMA), aimed specifically at “gatekeeper” companies, according to The Verge. Gatekeepers are companies with a market cap of at least $82 billion, at least 45,000 active users, and that run a “platform.” Such criteria would cover Amazon, Apple, Google, Meta, and Microsoft, but could also cover smaller companies and services as well.
Messaging, in particular, is a likely focus of the DMA, with the EU looking to force services like Facebook Messenger, iMessage, and WhatsApp to “open up and interoperate with smaller messaging platforms, if they so request.”
The DMA would include a number of other provisions, including stopping gatekeepers from preferring their own apps and services, as well as giving users the ability to uninstall default apps that come on their devices, and even choose which apps they want to use during install and setup.
Companies that sell or do business on a given platform would be entitled to access performance metrics from that platform. Similarly, companies that advertise on a platform would be given a way to independently confirm the performance of their advertising efforts.
The penalties for failure to comply would be severe, including up to 10% of a company’s annual worldwide revenue and periodic penalties up to 5% of its daily earnings. Most notably, the EU would also have the authority to enforce “behavioral and structural remedies.” This could including mandating that a company change how it operates its platform or service, and could even include forcing a company to spin off portions of its business, if the anti-competitive concerns cannot otherwise be addressed.
This is why, in the Digital Markets Act, there is a full toolbox where the sanctions become more and more severe,” the EU’s Commissioner for Competition, Margrethe Vestager told The Verge. “The fines will increase if you do not implement changes. Eventually, in the toolbox, there’s also the tool that you can actually break up a company if no change is happening, or if you are a repeat offender.”
The DMA represents the single largest effort by the EU to reign in the power and influence of Big Tech, combining a number of different efforts into one comprehensive piece of legislation. The legislation has not passed yet but, given the momentum that’s been building in the EU, it’s almost certainly going to pass sooner rather than later.
Casting further doubt on Nvidia’s attempt to purchase Arm Holdings, EU regulators have opened a formal investigation.
Nvidia announced in September 2020 that it had reached a deal to acquire Arm Holdings. Arm is one of the leading semiconductor design firms, licensing its designs to companies for use in their products. Some of the biggest names in tech, including Apple, Google, Qualcomm, Samsung and Nvidia, all use Arm’s designs.
The deal drew immediate scrutiny, with critics concerned Nvidia would undermine Arm’s traditional way of doing business. The company has always been strictly neutral, licensing its designs to any company willing to pay. Critics were concerned Nvidia might withhold Arm’s best designs for itself, giving it a competitive advantage.
The UK, where Arm is based, has already launched probes and investigations over competitive and national security concerns, and signaled it may seek to block the deal. According to Reuters, the EU is also getting in on the action, launching their own probe. The EU is evidently not satisfied with the concessions Nvidia has been willing to make for the deal to move forward.
“Whilst Arm and Nvidia do not directly compete, Arm’s IP is an important input in products competing with those of Nvidia, for example in datacentres, automotive and in Internet of Things,” EU competition chief Margrethe Vestager said.
“Our analysis shows that the acquisition of Arm by Nvidia could lead to restricted or degraded access to Arm’s IP, with distortive effects in many markets where semiconductors are used,” she continued.
The Commission will decide by March 15 whether the deal may move forward.
On the heels of reports the EU was preparing to investigate Google’s ad business, the EU Commission has opened a formal investigation.
Google has been facing investigations, antitrust inquiries and lawsuits with increasing frequency. The company recently settled with the French Competition Authority over how it operates its ad platform, and committed to making significant changes.
The EU is now opening an even broader investigation, aimed at determining whether Google has used its position to favor its own ad tech services over competitors.
“Online advertising services are at the heart of how Google and publishers monetise their online services,” Executive Vice-President Margrethe Vestager, in charge of competition policy, said. “Google collects data to be used for targeted advertising purposes, it sells advertising space and also acts as an online advertising intermediary. So Google is present at almost all levels of the supply chain for online display advertising. We are concerned that Google has made it harder for rival online advertising services to compete in the so-called ad tech stack. A level playing field is of the essence for everyone in the supply chain. Fair competition is important – both for advertisers to reach consumers on publishers’ sites and for publishers to sell their space to advertisers, to generate revenues and funding for content. We will also be looking at Google’s policies on user tracking to make sure they are in line with fair competition.“
The EU’s investigation could be one of the biggest challenges the company faces, and could have profound repercussions for how it conducts its ad business. The fact that Google recently settled the French investigation, and did not dispute the facts of the case, may make it harder for the company to get ahead of the EU’s investigation.
Apple scored a big win in European courts, with the General Court of the European Union ruling Apple’s tax deal with Ireland was legal.
The issue began when the European Commission (EC) ruled that Apple’s tax deal with Ireland was illegal, and improperly granted Apple an extraordinarily low tax rate. As a result, the EC said Apple owed some €13 billion in back taxes. Needless to say, Apple contested the ruling and vowed to fight it. Likewise, Ireland had a vested interest in the deal remaining in effect.
Ireland has developed a reputation for having very favorable tax laws, especially for big corporations. This has led many companies to move part of their business to the country, creating jobs and more than offsetting the benefits that would be gained from higher taxes. Despite Apple and Ireland vehemently defending their arrangement, the EC had ruled it was illegal, prompting the €13 billion tax bill.
The decision by the General Court of the European Union, the EU’s second-highest court, is a big win for Apple, Ireland and every other company that uses Ireland to get a lower tax rate.
Meanwhile, Margrethe Vestager, the regulator who has made a reputation going after big companies, made the following statement:
“We will carefully study the judgment and reflect on possible next steps.”
First, the Wall Street Journal reported that Google has been collecting very detailed healthcare records of millions of Americans through its deal with Ascension, prompting severe backlash and a government inquiry. Then Google announces its plans to offer checking accounts, only to face backlash from individuals concerned about privacy ramifications, and predictions that Congress may try to thwart the company’s efforts.
According to Business Insider, things are about to get much worse. An investigation by 48 states, Washington, D.C. and Puerto Rico into alleged anti-competitive behavior in Google’s advertising business is being expanded to include its Android operating system and search engine results.
The investigation, led by Texas Attorney General Ken Paxton, could see Google face the same level of scrutiny it has in the EU, which ultimately led to $9.4 billion in fines. On the heels of EU Commissioner Margrethe Vestager’s comments questioning the value of breaking up big tech companies in favor of holding them to a higher standard, it appears the U.S. may be taking a similar approach.
With Google expanding into new markets and industries, a widening inquiry is the last thing it needs.
Once the darling of the U.S. economy, big tech has increasingly come under scrutiny, with some politicians—most notably Senator Elizabeth Warren—even calling for the breakup of big tech companies.
According to a report by Business Insider, EU Commissioner Margrethe Vestager doesn’t share that opinion. Commissioner Vestager has made a name for herself going after big tech companies like Google, Amazon and Apple, in some cases imposing record fines. In spite of the reputation she’s built, Commissioner Vestager believes breaking up big tech will only result in more problems.
“From a competition point of view, you would have to do something that breaking up the company was the only solution to the illegal behavior, to the damage,” Vestager said. “And we don’t have that kind of case right now. We don’t have a problem that big where breaking up could be the solution.”
Instead, Vestager believes big tech companies—especially those that dominate a particular segment—should be held to a higher standard.
“When you get that big, you get a special responsibility, because you are the de factor the ruler in the sector that you own.”
While scrutiny and fines are certainly not welcome, it’s safe to say most tech companies would welcome Vestager’s approach, especially when compared with the possibility of a breakup.
The European Union is on the prowl again in a likely attempt to win cash and concessions from Amazon. This is another investigation in a long string of investigations into American companies designed to extract big cash payments.
European Commissioner for Competition, Margrethe Vestager, indicates that the issue is the possible use of third-party seller data by Amazon to determine which products it might decide to produce and sell itself, thus competing and presumably putting out of business the other sellers of that product. Vestager admits that there have been no formal complaints from resellers but they “have people” coming to them and asking questions about this issue.
European Commissioner for Competition, Margrethe Vestager discussed their investigation on CNBC’s Closing Bell:
EU Suspects Amazon Is Using Data to Compete With Third-Party Sellers
It’s too early to have a concern but we like to understand how this is working because Amazon has this dual role, they host a lot of little guys and enabling them to do e-commerce which is a great thing, at the same time they’re a big guy in the same market. How do they treat the data that they get from the little guy? Does that give them an advantage that cannot be matched or how to understand this?
We have concerns from the marketplace and we have seen this also in a sector-wide inquiry so so we’re very interested to learn also in deep detail how this works.
There Are No Formal Complaints Filed From Third-Party Sellers
One thing is to enable the little guy to do business. It’s another thing that once you have enabled it and you see how it works in the marketplace basically you take it and because you’re a big guy you do large scale so you can sort of occupy that marketplace yourself. We have people coming to us with concerns but no formal complaints have been filed from third-party sellers.
The EU Already Settled an eBook Case with Amazon
We have already had one Amazon case on eBooks, on German and English spoken eBooks. We saw that Amazon was saying if you as one of our suppliers do something innovative, if you lower your prices or something like that, you always have to give us the same benefit and that, of course, made it very difficult for the eBooks market to innovate.
If you always have to give Amazon whatever you have then of course that puts a lid to innovation. That we solved in a settlement actually covering ebooks in almost all segments.
Not Opposed to Amazon but We Have Questions
It’s important that the price point is right because for many people on a low budget, of course, low prices is of the essence and enabling choice is a great thing. We also want to see that innovation is thriving because being a customer in an innovative marketplace is, of course, better than being a customer in a non-innovative marketplace.
This is what we’re trying to understand how does this work and of course, it may turn out that we have no further questions to be asked but that remains to be seen.
EU Commision Meeting With US FTC
We’ve had a very good meeting today with Federal Trade Commission Chairman Joseph Simons and others from the FTC, and we didn’t discuss in any detail these questions. What we discussed is our cooperation which is actually very good because we exchange views, but we don’t try to walk in each other’s shoes.
Status of the Google EU Investigation
Of course, we expect a change of behavior because the decision is a cease-and-desist decision, you have to stop this and you cannot put anything in its place that has an equivalent effect. This is about enabling choice for the ones who produces our phone so that that maybe you can have a phone that carries other apps when you have the out-of-the-box experience.
That is important for us to see this change in the marketplace to show that those who actually have the skills maybe to do another operating system from the Android open source code that they may be able to do that. The fine will have to be paid and then of course it is for Google to decide if they will appeal the case or not.
