FTC Sues to Block $40 Billion Nvidia and Arm Merger

The merger would give Nvidia access to intellectual property that would harm competition, the commission alleges.

Dec 2 2021, 9:30pm

The Federal Trade Commission is suing to block US-based graphics card maker Nvidia's $40 billion acquisition of its UK-based semiconductor companyrival Arm. If completed, it would be the largest acquisition in the history of semiconductor chip manufacturing. 

The planned acquisition and lawsuit to stop it come during a global chip manufacturing shortage that is snarling supply chains for everything from video game consoles to smartphones. According to a press release, the FTC's complaint alleges that the acquisition would provide the "means and incentive to stifle innovative next-generation technologies, including those used to run datacenters and driver-assistance systems in cars."

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In October, the European Commission announced it is also actively investigating the merger.

"Whilst Arm and Nvidia do not directly compete, Arm's IP is an important input in products competing with those of Nvidia, for example in datacentres, automotive and in Internet of Things," EU competition chief Margrethe Vestager said in a statement.

“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 the release. “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. 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.”

The FTC said that the merger would stifle competition and harm consumers, but was not specific about what its legal arguments would be, and the complaint itself is not publicly available yet. In an email, the FTC declined to comment further and told Motherboard "Sorry but the complaint is not available yet. That’s why it is not linked to the release. It takes a few days to do the redactions of sensitive business information and make it a public document. Once it is public, it will be linked to the release." The FTC said it would be available within 24-48 hours.

Successfully blocking the deal would be a blow to Japanese multinational SoftBank, which bought Arm in 2016 for $31 billion. The firm is selling Arm now in part to satisfy demands of activist shareholder Elliot Management. Elliot Management wanted SoftBank to not only raise capital after tens of billions of dollars of losses in its Vision Fund startup investments, but to engage in a share buyback spree to prop up the company’s slumping share price.

The complaint identifies “High-Level Advanced Driver Assistance Systems” in cars as one of the three areas where a merger would harm competition. These chips power features like lane keeping assist, automatic emergency braking, and automatic lane-changing among other safety and convenience features. Car production has been seriously hampered by a global semiconductor chip shortage since the pandemic began, but the shortage is among cheaper, less powerful chips for fuel management systems, touchscreens, and digital displays.

Tagged:

arm, FTC, NVIDIA, Antitrust

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