The US Federal Trade Commission has filed a lawsuit to block Nvidia's acquisition of UK-based chip designer and supplier Arm Limited. Nvidia first announced the acquisition in September 2020, when Nvidia CEO Jensen Huang said the merger “will create a company fabulously positioned for the age of AI.” But in November 2021 the UK government launched an investigation into the deal over national security and supply chain concerns, and shortly afterwards the US began scrutinizing the deal as well.
As a result of that scrutiny, the FTC has now determined that the combined company would be too big and powerful, giving it both the means and the incentive “to stifle innovative next-generation technologies.”
“Tomorrow’s technologies depend on preserving today’s competitive, cutting-edge chip markets,” FTC Bureau of Competition director Holly Vedova said in a statement. “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.”
Arm designs and licenses chip designs to companies including Nvidia for use in a wide range of applications including graphics, AI processing, advanced networking, and even computer-assisted driving. Both Nvidia and its “important competitors” rely on Arm to develop their products, and the FTC's opinion is that giving Nvidia control over both ends of the design and production pipeline would probably not be good for competition.
The FTC's lawsuit says the merger will result in competitive harm in three global markets:
- High-Level Advanced Driver Assistance Systems for passenger cars. These systems offer computer-assisted driving functions, such as automated lane changing, lane keeping, highway entrance and exit, and collision prevention.
- DPU SmartNICs, which are advanced networking products used to increase the security and efficiency of datacenter servers.
- Arm-Based CPUs for Cloud Computing Service Providers. These new and emerging products leverage Arm’s technology to meet the performance, power efficiency, and customizability needs of modern datacenters that provide cloud computing services.
The lawsuit also alleges that the acquisition will give Nvidia access to competitors' trade secrets, which they normally share with Arm in order to assist with development, testing, and support. Arm itself may also be less likely to pursue new innovations that could conflict with Nvidia's interests.
The FTC said the decision to oppose the merger was unanimous, with all four commissioners voting against it. The administrative trial to determine the outcome of the case is set to begin on August 9, 2022.