FTC Sues To Block Nvidia’s $40 Billion Acquisition Of Arm

The Federal Trade Commission alleges that the deal would ‘harm competition’ in three global markets where Nvidia competes using Arm-based products: high-level advanced driver assistance systems for passenger cars, data processing units, and Arm-based CPUs for cloud service providers.

The Federal Trade Commission is suing to block Nvidia’s $40 billion acquisition of Arm, alleging that the deal would “stifle innovative next-generation technologies,” including technologies for data centers.

The U.S. agency announced the lawsuit on Thursday, naming Nvidia, Arm and Arm’s current owner, Japan-based SoftBank Group, as defendants. It alleges that the deal, announced last year, would “harm competition” in three global markets where Nvidia competes using Arm-based products: high-level advanced driver assistance systems for passenger cars, data processing units, and Arm-based CPUs for cloud service providers.

[Related: UK Watchdog Calls For Extra Scrutiny Into Nvidia-Arm Deal]

Nvidia’s stock price is up slightly in after-hours trading Thursday.

The FTC said its investigation into the deal was aided by staff at competition watchdog agencies in the European Union and United Kingdom, where the acquisition was already under heavy scrutiny. It also received assistance from agencies in Japan and South Korea. The trial is set to begin Aug. 9, 2022.

“The FTC is suing to block the largest semiconductor chip merger in history to prevent a chip conglomerate from stifling the innovation pipeline for next-generation technologies,” said FTC Bureau of Competition Director Holly Vedova in a statement.

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

An Nvidia spokesperson told CRN that the company believes the deal would still be beneficial to the industry at-large — a case that it will make to the FTC. The spokesperson reiterated Nvidia’s plans to invest in Arm’s research and development, maintain Arm’s open licensing model and “create more opportunities for all Arm licensees and expand the Arm ecosystem.”

“As we move into this next step in the FTC process, we will continue to work to demonstrate that this transaction will benefit the industry and promote competition,” the Nvidia spokesperson said.

Arm did not immediately respond to a request for comment.

In a press release announcing the lawsuit the FTC said Arm’s role as the “Switzerland” of the semiconductor industry is a prime reason for why it believes Nvidia’s acquisition of the British chip designer would harm competition.

Many companies, including Apple and Amazon, license Arm’s technology to build their own processors, and Nvidia’s direct rivals, Intel and AMD among them, also rely on Arm for some products such as FPGAs and SmartNICs. AMD uses Arm for security chips in its EPYC server processors.

If Nvidia were to acquire Arm, the FTC alleged that it would create uneven access to Arm’s technology between Nvidia and other companies. This would reduce competition and, in turn, reduce product quality, innovation and choice while also increasing prices for customers, the agency said.

The FTC said it was also concerned that the acquisition would give Nvidia “access to the competitively sensitive information of Arm’s licensees, some of whom are Nvidia’s rivals.” It added that this was “likely to decrease the incentive for Arm to pursue innovations that are perceived to conflict with Nvidia’s business interests,” which would in turn “harm innovation competition.”

“Arm licensees share their competitively sensitive information with Arm because Arm is a neutral partner, not a rival chipmaker. The acquisition is likely to result in a critical loss of trust in Arm and its ecosystem,” the agency alleged in its complaint.