FTC sues to block Nvidia’s Arm acquisition

Deal for the UK-based chipmaker is now subject to an administrative trial in August 2022

Trade

Image: Shutterstock via Dennis

3 December 2021

Nvidia’s acquisition of Arm has been dealt a fresh blow as the US Federal Trade Commission (FTC) has sued to block the merger over anti-competition concerns.

The FTC said the deal would “stifle” competition for multiple technologies because Arm is a “critical input” that fosters competition between Nvidia and its rivals.

Such an acquisition, it said, would give Nvidia a way to “undermine” other companies.

An administrative trial is due to start 9 August 2022, but Nvidia appears unconcerned by the lawsuit, calling it the “next step” in the FTC’s process in a statement to Techcrunch. The firm remains confident that its proposed acquisition will actually “accelerate” Arm’s business model and foster more competition.

However, an FTC lawsuit is a significant step as the commission often takes legal action when it believes a company is breaking the law. Unlike regulators in the UK and Europe, which have powers to block certain deals, the FTC operates under the ‘Hart-Scott-Rodino Act’, which only allows it to review cases that affect commerce in the US. It has to go through the court to block deals that it believes would “substantially lessen competition”.

“Tomorrow’s technologies depend on preserving today’s competitive, cutting-edge chip markets,” said FTC bureau of competition director Holly Vedova. “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.”

Nvidia’s plans to take over Arm, which is currently owned by the Japanese investment group SoftBank, has been heavily scrutinised from the get-go. Regulators and MPs in the UK have expressed concerns over the proposals, with the Competition and Markets Authority currently investigating the merger.

The European Commission has also launched its own investigation into the purchase.

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