Nvidia’s acquisition of Arm has been challenged in court by the Federal Trade Commission (FTC), adding further strain on the already controversial deal.
The FTC on Thursday sued to block the $40 billion acquisition from SoftBank on antitrust grounds.
The deal has lingered for months due to prolonged antitrust interest of regulators that has put all parties involved under intense check. FTC’s lawsuit is the latest move to halt the acquisition, and it highly puts its completion under uncertainty.
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“The proposed vertical deal would give one of the largest chip companies control over the computing technology and designs that rival firms rely on to develop their own competing chips,” the FTC said in an announcement.
Last year, when Nvidia moved to acquire Arm from SoftBank, rival tech companies including Qualcomm, Alphabet Inc.’s Google and Microsoft filed a complaint with the FTC, the European Commission, the UK’s Competition and Markets Authority (CMA), and China’s State Administration for Market Regulation (SAMR). They expressed worry that the acquisition will monopolize the chip market, giving Nvidia control over a critical supplier that licenses essential chip technology to the likes of Apple, Intel, Samsung, Amazon and China’s Huawei.
“The complaint alleges that the proposed merger would give Nvidia the ability and incentive to use its control of this technology to undermine its competitors, reducing competition and ultimately resulting in reduced product quality, reduced innovation, higher prices, and less choice,” the FTC said in its statement.
“Arm is a core supplier of architecture technology to most semiconductor companies. Its Arm instruction set is at the core of nearly all mobile processors powering smartphones, including those made by Apple and Android devices that use Qualcomm chips.”
By February, the FTC’s investigation had moved to second phase and the regulator had asked SoftBank, Nvidia and Arm to provide it with more information. It’s going to be a long scrutiny involving a lot of documents and time, even though Nvidia had argued that the purchase price alone means it has no incentive to mess with neutrality.
New FTC head, more trouble for tech companies
Trailblazer-Lina Khan, the 31-year old lawyer appointed by President Joe Biden, took charge of the FTC earlier this year and took an aim at the Nvidia-Arm’s deal as one of the many antitrust cases to prioritize. Since appointment, her signal is pointing to a broader antitrust enforcement that will curtail the excesses of tech companies, which is believed to have thrived under the lackluster approach of the regulator in the past.
Khan spent her time as an academic and a congressional staffer prior to her nomination studying large technology companies and the unique ways these firms can amass power in digital markets. The companies on her radar include Amazon, Facebook and Google. The FTC had earlier, filed lawsuits against some of these companies.
The market regulator said on Thursday that Arm’s licensees, which include Nvidia’s competitors, share competitive information with the technology firm. The FTC’s lawsuit focuses on chips for driver assistance, networking products, and Arm microchips for cloud computing servers. The FTC voted unanimously to issue the complaint, it said.
As the investigation escalates, Nvidia continues to defend the acquisition saying it will only promote competition in the industry instead of crippling it.
“As we move into this next step in the FTC process, we will continue to work to demonstrate that this transaction will benefit the industry and promote competition,” an Nvidia representative said in a statement.
“NVIDIA will invest in Arm’s R&D, accelerate its roadmaps, and expand its offerings in ways that boost competition, create more opportunities for all Arm licensees and expand the Arm ecosystem. NVIDIA is committed to preserving Arm’s open licensing model and ensuring that its IP is available to all interested licensees, current and future,” it added.
Per CNBC, the trial before the FTC’s own administrative law judge is set to begin on Aug. 9, 2022. The FTC has the option of bringing cases either through this in-house process or in federal court. Under the administrative process, the ALJ will make an initial determination based on the trial, which can be appealed to the full commission for a vote. That decision can still ultimately be appealed in federal court.
With the legal battle set to be long, the Arm’s deal that Nvidia previously said it expected to close in 2022, will linger much longer into the future – if at all it will ever be closed.