03/07/2022

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US FTC files lawsuit to block Nvidia acquisition of Arm Limited

The Federal Trade Commission’s lawsuit claims the Arm acquisition would give Nvidia far too much power over competition.

Nvidia’s ambitious intention to acquire Arm – one of the most important chip designers and suppliers in the world today – may be in jeopardy due to government intervention. The United States Federal Trade Commission (FTC) has formally filed a lawsuit against Nvidia over its acquisition, claiming that if said acquisition goes through, it would give Nvidia too much power over the tech industry and supply chains. This lawsuit follows further investigative scrutiny by other government authorities.

The FTC filed its lawsuit against Nvidia with a press release on the matter on December 2, 2021. Nvidia has been moving to acquire Arm from Softbank in a deal valued at $40 billion USD since September 2020. However, issues quickly arose over the deal going into effect. US chipmaker and Apple partner Qualcomm objected to the acquisition, citing gatekeeping concerns. Furthermore, UK officials have also been investigating the deal to determine whether or not it would violate antitrust law and allow for easy implementation of anti-competitive business practice.

Nvidia CEO Jensen Huang previously said the Arm deal would
Nvidia CEO Jensen Huang previously said the Arm deal would “create a company fabulously positioned for the age of AI.” Now analysts believe the deal is highly unlikely to go through.

Nonetheless, the US FTC obviously came to the conclusion that Nvidia’s acquisition of Arm is indeed problematic for the world tech market.

“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,” said FTC Bureau of Competition Director Holly Vedova. “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 lawsuit further alleges that if Nvidia acquires Arm, the former would gain unfair access to competitor secrets and dealings that are disclosed to Arm in development and support on collaborative projects. Finally, it claims the deal could lessen incentive to collaborate outside of Nvidia’s benefit.

It will remain to be seen if the FTC’s lawsuit will completely shut down the Nvidia/Arm deal, but it could also open the gates on further government intervention, including that of the UK whose investigation was ongoing. Stay tuned as we continue to follow this story for further updates and details.