Federal Trade Commission filed suit to block Nvidia's acquisition of Arm

A few months ago we shared here on the blog the news about Nvidia's $ 40.000 billion acquisition of Arm and that at the time it would go through a review for approval of said purchase, but it seems that this may not be possible at the moment, since The Federal Trade Commission announced that it will take legal action to prevent the merger from taking place, fearing that the combined companies will not suppress competing next-generation technologies.

The demand comes after an FTC investigation into the deal following complaints from Google, Microsoft and Qualcomm shortly after the merger was announced. The FTC is concerned that Nvidia may gain access to confidential information of Arm's licensees already competing with Nvidia, as well as dissuading Arm from working on new products and designs that would conflict with Nvidia's own interests by taking advantage of the competitors.

Nvidia is the largest manufacturer of graphics processors And it's expanding the use of the gaming component into new areas such as artificial intelligence processing in data centers and autonomous cars, and merging its own capabilities with Arm-designed central processing units could allow it to catch up or even get ahead of itself. Intel and Advanced Micro Devices, according to Hans Mosesmann, an analyst at Rosenblatt Securities.

In April, the British government decided to intervene for reasons of national security. Digital Secretary of State Oliver Dowden "issued a Public Interest Notice of Intervention (PIIN) regarding Arm's proposed sale to NVIDIA."

With this, the Federal Trade Commission has filed a lawsuit to block the acquisition of Arm by Nvidia:

“The proposed vertical agreement would give one of the largest chip companies control of computer technology and designs. trusted by rival companies to develop their own competing chips. The FTC complaint alleges that the combined company would have the means and incentives to stifle next-generation innovative technologies, including those used to manage data centers and driver assistance systems in automobiles.

"The FTC is launching a lawsuit to block history's largest semiconductor chip merger to prevent the chip conglomerate from stifling the innovation pipeline for next-generation technologies," said Holly Vedova, director of the competition office at the FTC. FTC, in a statement. “The technologies of tomorrow depend on the preservation of today's advanced and competitive chip markets. This proposed deal would distort Arm's incentives in the chip markets and allow the combined company to unfairly undermine Nvidia's competitors. The FTC complaint should send a strong signal that we will act aggressively to protect our critical infrastructure markets against illegal vertical mergers that have far-reaching and damaging effects on future innovations. «

Since Arm's technology is an essential input that enables competition between Nvidia and its competitors in various markets, The lawsuit alleges that the proposed merger would give Nvidia the ability and incentive to use its control of this technology to undermine its competitors, thereby reducing competition and ultimately resulting in reduced product quality, reduced innovation, higher prices, and fewer options, hurting the millions of Americans. that benefit from Arm-based products.

According to the complaint, the acquisition will hurt competition in three global markets where Nvidia competes using Arm-based products:

• high-level advanced driver assistance systems for passenger cars. These systems provide computer-aided driving functions such as automatic lane change, lane keeping, freeway entering and exiting, and collision avoidance.
• DPU SmartNIC, which are advanced networking products used to increase the security and efficiency of data center servers
• Arm-based processors for cloud computing service providers. These new and emerging products leverage Arm technology to meet the performance, energy efficiency and customization needs of modern data centers providing cloud computing services.

The lawsuit also alleges that the acquisition will hurt competition by giving Nvidia access to information. competitive responsive from Arm's licensees, some of which are competitors to Nvidia, and which will likely reduce the incentive for Arm to pursue innovations that are perceived to conflict with Nvidia's business interests.

Today, Arm's licensees, including Nvidia's competitors, regularly share sensitive competitor information with Arm. Licensees Trust Arm for Development Assistance, design, testing, debugging, troubleshooting, maintenance and improvement of its products, according to the complaint. Arm's licensees share their sensitive competitive information with Arm because Arm is a neutral partner, not a rival chipmaker. The acquisition is likely to result in a critical loss of confidence in Arm and its ecosystem, according to the complaint.

The acquisition is also likely to hurt innovation competition by eliminating innovations that Arm would have pursued without conflicting with Nvidia's interests. The merged company would have less incentive to develop or activate new features or beneficial innovations if Nvidia determines that they are likely to harm Nvidia, according to the complaint.

Source: https://www.ftc.gov/