Japan’s Fair Trade Commission has announced that it has closed its antitrust review into U.S. semiconductor giant Broadcom’s server virtualisation software licensing practices without finding violations of the Anti-Monopoly Act. The JFTC had launched a full-scale investigation that included an on-site inspection of subsidiary VMware’s offices in September 2024, but after thoroughly examining collected materials and interviewing relevant parties, concluded that no conduct constituting a violation could be established.

At issue was the new licensing framework Broadcom began implementing around April 2024. Previously, customers could select individual software products based on their needs, but the new system consolidated offerings into a subscription-based comprehensive package that includes storage-related products and other components. This change triggered a wave of contract modification notices to Japanese IT companies including Fujitsu, NSSOL, and Internet Initiative Japan (IIJ).

The JFTC had assessed that customers, facing difficulties switching to competitors’ products due to cost burdens and system migration challenges, may have been forced to purchase unnecessary products. Suspecting potential violations of the Anti-Monopoly Act’s prohibitions on “unfair trade practices (tying)” and “abuse of superior bargaining position,” the commission conducted an on-site inspection of VMware’s Tokyo office in September 2024.

However, through subsequent detailed investigation, the JFTC comprehensively examined actual transaction practices, the degree of disadvantage suffered by competitors, and the power dynamics between Broadcom and its business partners, ultimately determining that the evidence was insufficient to establish an antitrust violation. The commission explained that the review was closed because no facts constituting a violation could be confirmed.

During the review process, Broadcom voluntarily proposed remedial measures regarding changes to transaction terms. Specifically, the company offered to “establish an advance notice period to consider the content of condition changes when significant disadvantages arise for business partners,” and has already notified domestic customers of this commitment. The JFTC appears to have factored these proposals into its final decision to close the review.

Broadcom’s overhaul of its virtualisation software sales strategy is not limited to the Japanese market. The company has implemented similar licensing changes worldwide, and in Europe, the issue has drawn sharp criticism from CISPE (Cloud Infrastructure Services Providers in Europe), an industry group comprising major cloud operators including Amazon.com. The group has called on European competition authorities to investigate, creating international ripple effects.

Server virtualisation software is a foundational technology that enables the creation of multiple independent computing environments, called “virtual machines,” on a single physical server. It is a critical product directly linked to enterprise IT infrastructure consolidation and cost reduction, and forms the backbone of operations particularly for cloud service providers. Broadcom acquired VMware in 2023 for approximately $61 billion, securing overwhelming market dominance in this sector.

With the review now closed, Broadcom’s new licensing framework is expected to remain in place in the Japanese market for the foreseeable future. However, the JFTC issued a statement saying it “will continue to monitor competitive conditions in digital markets from the perspective of promoting fair and free competition,” clearly signalling that it has not relaxed its scrutiny of software bundling strategies by major IT companies. Depending on developments in Europe, the issue could once again become a focal point in international competition policy.