Nvidia’s Arm deal faces another blow, this time from the FTC

3 Dec 2021

Image: © Sundry Photography/Stock.adobe.com

The US Federal Trade Commission wants to block Nvidia’s Arm takeover as it believes the combined company will stifle competition.

Nvidia’s contentious acquisition of UK chip designer Arm is facing yet another roadblock as the US Federal Trade Commission (FTC) is suing Nvidia to block the deal.

The acquisition, which is now valued at around $54bn, has been fighting an uphill battle since it was first announced more than a year ago, with concerns being raised by the UK’s competition watchdog and then from the EU.

Now, the FTC wants to block the acquisition. In a statement, the FTC said Arm’s technology is a critical input that enables competition between Nvidia and its competitors in several markets.

It believes the proposed merger would give Nvidia the ability and incentive to use its control of this technology to “unfairly undermine” competitors, reducing competition and ultimately resulting in reduced product quality, reduced innovation, higher prices and less choice.

The FTC’s bureau of competition director, Holly Vedova, said the proposed deal would allow the combined company to stifle the innovation pipeline for next-generation technologies.

“Tomorrow’s technologies depend on preserving today’s competitive, cutting-edge chip markets. This proposed deal would distort Arm’s incentives in chip markets and allow the combined firm to unfairly undermine Nvidia’s rivals,” she said.

“The FTC’s lawsuit should send a strong signal that we will act aggressively to protect our critical infrastructure markets from illegal vertical mergers that have far-reaching and damaging effects on future innovations.”

Opposition from all sides

The Competition and Markets Authority (CMA) in the UK raised similar concerns in August when it said the deal would require an in-depth investigation, which is now underway.

“We’re concerned that Nvidia controlling Arm could create real problems for Nvidia’s rivals by limiting their access to key technologies, and ultimately stifling innovation across a number of important and growing markets,” said Andrea Coscelli, chief executive of the CMA.

In October, the European Commission also launched an in-depth antitrust investigation, with a decision expected by 15 March 2022.

“While Arm and Nvidia do not directly compete, Arm’s IP is an important input in products competing with those of Nvidia, for example in data centres, automotive and internet of things,” said executive vice-president Margrethe Vestager, who is responsible for competition policy.

“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.”

Despite opposition from several watchdogs, Nvidia has been confident the deal will go through.

“Although some Arm licensees have expressed concerns or objected to the transaction, and discussions with regulators are taking longer than initially thought, we are confident in the deal and that regulators should recognise the benefits of the acquisition to Arm, its licensees and the industry,” Nvidia CFO Colette Kress said earlier this year.

In a letter to the Financial Times a month after the deal was first announced, Nvidia founder and CEO Jensen Huang said the company would maintain Arm’s open licensing model. “We have no intention to ‘throttle’ or ‘deny’ Arm’s supply to any customer.”

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Jenny Darmody is the deputy editor of Silicon Republic

editorial@siliconrepublic.com