Broadcom's VMware accused of abusing market dominance in China

12 June 2024
By Yonnex Li

Broadcom's virtualization unit VMware is facing allegations before China's antitrust regulator that the software maker abused its market dominance, MLex has learned.

Chinese enforcers are preliminarily assessing accusations that VMWare engaged in abusive practices such as bundling, discriminatory treatment and imposing unfair trading conditions, potentially in breach of the Antimonopoly Law, it is understood.

VMware, for instance, allegedly required trading partners to procure more products than needed as a condition for providing follow-on software upgrades.

The development comes as VMware fights similar abuse allegations at China's Supreme People's Court. The top court recently heard appeals from both VMware and the plaintiff against a 2022 ruling from the Beijing Intellectual Property Court, MLex understands.

In that first-instance verdict, the lower court concluded that while VMware didn't enjoy a dominant position, its practices in dispute were questionable, it is said.

It remains to be seen if last year's findings by the State Administration for Market Regulation, or SAMR, during its scrutiny of the Broadcom acquisition could disadvantage VMware in the ongoing administrative and court cases.

China conditionally cleared Broadcom's VMware buyout last November. In its review, SAMR determined that VMware had "market control power," citing customer surveys indicating that VMware had an "absolutely leading market position" and it was difficult for rivals to form competitive constraints.

According to SAMR, VMware topped the global and Chinese markets for non-public cloud-virtualization software in 2021, with a share of up to 97 percent and 27 percent, respectively. More than 50 percent of customers deemed VMware as an "irreplaceable major supplier."

These and other findings eventually led SAMR to order a package of 10-year remedies for the merging parties to mitigate antitrust concerns.

Broadcom makes networking, data-center and server hardware. VMware's virtualization software consolidates workloads on servers, making it easier for the devices to handle more than one program.

Broadcom, which handles media enquiries for VMware, didn't respond to a request for comment.

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