FTC sues Nvidia to stop its takeover of Arm

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US Federal Trade Commission filed a lawsuit To prevent Nvidia’s acquisition of UK-based chip designer and supplier Arm Ltd. Nvidia first announced the acquisition in September 2020, when Nvidia CEO Jensen Huang said the merger would “brilliantly position a company 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 soon thereafter the US began investigating the deal as well.

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As a result of that investigation, the FTC has now determined that the combined company will be too large and powerful, giving it both the means and incentives to “press the next generation of innovative technologies.”

“Tomorrow’s technologies depend on preserving today’s competitive, cutting-edge chip markets,” Holly Vedova, director of the FTC Bureau of Competition, said in a statement. “This proposed deal would distort Arm’s incentives in the chip markets and allow the combined firm to unfairly undermine Nvidia’s rivals. The FTC’s lawsuit should send a strong signal that we are degrading our critical infrastructure markets from illegal verticals. Will act aggressively to avoid mergers that have far-reaching and detrimental effects on future innovations.”

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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. Nvidia and its “significant competitors” both rely on Arm to develop their products, and the FTC’s opinion is that giving Nvidia control of both ends of the design and production pipeline probably won’t bode well for the competition.

The FTC’s lawsuit states that the merger would result in a competitive disadvantage in three global markets:

  • High level advanced driver assistance system for passenger cars. These systems provide computer-assisted driving functions, such as automatic lane changing, lane keeping, highway entry and exit, and collision prevention.
  • DPU SmartNICs, which are advanced networking products used to enhance 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 optimization needs of modern datacenters providing cloud computing services.
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The lawsuit also alleges that the acquisition would give Nvidia access to competitors’ trade secrets, which they typically share with Arm, to aid in development, testing, and support. Arm may also be less likely to pursue new innovations that may 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 scheduled to begin on August 9, 2022.

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