Tesco's £100m High Court claim: a timely reminder to keep software licences under review

Tesco has issued proceedings in the English High Court against Broadcom Inc (Broadcom), VMware International Unlimited Company (VMware), and reseller Computacenter (UK) Ltd, seeking at least £100m in damages (plus interest) for alleged breaches of software licensing agreements.

The dispute centres on Tesco’s perpetual licences for VMware products, which it claims are now unsupported following Broadcom’s post-acquisition shift to “simplify its portfolio” by way of offering a subscription-only model.

The supermarket giant argues that it is being forced to pay a 237% increase for the perpetual licences it already owns, and for new subscription-based licences simply to access support and updates which it does not want or need. With around 40,000 virtual workloads underpinning its operations, Tesco warns that the lack of support could disrupt its ability to supply groceries across the UK and Ireland.

Tesco allege that Broadcom has abused its dominant position in the relevant product markets (for server virtualisation software and support services), and that it has behaved anti-competitively by adopting a coercive “take it or leave it” approach to the supply of products that Tesco requires.

This case is a stark illustration of how corporate changes, and particularly acquisitions, can materially affect significant software licensing arrangements. Broadcom’s acquisition of VMware in 2023 triggered a fundamental shift in licensing policy, with ripple effects now being felt across sectors.

Key takeaway for in-house counsel and procurement teams:

Software licences are not static assets. They are contractual rights that may be vulnerable to change, especially in the context of M&A activity. Where critical infrastructure or operations depend on licensed software, it is essential to:

1. review licence terms regularly, particularly around support, upgrades, and renewal rights;
2. assess the impact of corporate transactions (both your own and those of your suppliers) on licence viability; and
3. seek legal advice early when renegotiating or renewing licences, especially where perpetual rights are involved.

Tesco’s claim is a reminder that software licensing is not just a technical or procurement issue, it is increasingly a strategic legal risk that must be carefully monitored and managed.