Broadcom and Brocade supply different networking products for communications and datacentre infrastructures and applications. These products are typically used by financial institutions, telecommunications and media companies and public administrations. Broadcom is also a provider of "off-the-shelf" chips and of custom-built chips for special applications used in these networking products. Broadcom's and Brocade's activities donot overlapsince the companies supply different products.
However, the Commission had competition concerns regarding the relationship between the parties created by the transaction as notified, as well as regarding the complementarity between Broadcom's and Brocade's products. The Commission's investigation focused on two areas: (i) chips needed for Fibre Channel Storage Area Network and Internet Protocol networking products, and (ii) switches and cards for Fibre Channel Storage Area Networks, which are complementary products.
(i) Chips for networking products
The Commission's investigation showed that there is no risk of shutting out competition in relation to chips supplied by Broadcom (off-the-shelf and custom-built). This is because there are other chip manufacturers that represent a viable alternative to competitors of the merged entity in the markets for the supply of two types of network products: (a) Fibre Channel Storage Area Network products and (b) Internet Protocol networking products.
However, the Commission had some concerns about the relationship created by the transaction in markets for Fibre Channel Storage Area Network products. In particular, the Commission had concerns that confidential information from competitors could be used by the merged entity to favour its own products.
(ii) Switches and cards for Fibre Channel Storage Area Network
The Commission also investigated whether the merged entity would have the ability and incentive to bundle the complementary Fibre Channel Storage Area Network products of Broadcom and Brocade. Brocade supplies switch devices, whereas Broadcom manufactures Host Bus Adaptor (HBA) cards. The Commission's investigation showed that there is no risk of the merged entity squeezing out competing switch devices or HBA cards suppliers by commercially bundling these two products.
However, the Commission had concerns that the merged entity could degrade the interoperability between its own Fibre Channel switches and the HBA cards of competing vendors. This would be to the detriment of the latter and in favour of its own HBA cards.
The proposed commitments
To address these concerns, Broadcom committed to cooperate closely and in a timely manner with competing HBA cards suppliers to achieve the same level of interoperability as that of its own HBA cards and to protect third party confidential information.
In view of the proposed remedies, the Commission concluded that the transaction, as modified by the commitments, would no longer raise competition concerns. The decision is conditional upon full compliance with the commitments.
Companies and products
Broadcom is active in the development and supply of a broad range of semiconductor devices (i.e. integrated circuits or chips) for a number of business segments such as wireline and wireless communication, enterprise storage and industrial applications.
Brocade supplies networking products such as fixed and embedded switches used in applications based on Fibre Channel Storage Area Network and Internet Protocol technologies that enable highly secure and reliable data transfers between servers and storage equipment over fibre optic cables in data centres.
Merger control rules and procedures
The Commission has the duty to assess mergers and acquisitions involving companies with a turnover above certain thresholds (see Article 1 of the Merger Regulation) and to prevent concentrations that would significantly impede effective competition in the EEA or any substantial part of it.
The vast majority of mergers do not pose competition problems and are cleared after a routine review. From the moment a transaction is notified, the Commission generally has a total of 25 working days to decide whether to grant approval (Phase I) or to start an in-depth investigation (Phase II).