FTC sues to halt Nvidia Arm purchase

Arguing that innovation and competition would be harmed, the Federal Trade Commission on Thursday sued to scuttle a proposed purchase of Arm by graphics-giant Nvidia.

The federal agency charged with anti-trust enforcement said it made its decision to intervene in order to protect key technologies for data centers and driver-assisted cars, among other essential semiconductors.

“The FTC is suing to block the largest semiconductor chip merger in history to prevent a chip conglomerate from stifling the innovation pipeline for next-generation technologies,” FTC Bureau of Competition Director Holly Vedova said in a release. “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. 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 obviously disagreed, saying its purchase of Arm would benefit the industry.

“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,” the company said in a statement released to the press. “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.”

PCWorld was unable to reach Arm officials for comment, but the company had previously declined to comment to the Reuters news agency, so its likely to be keeping its head down for now.

Nvidia dropped a bombshell on the technology world when it announced in September of 2020 that it was in negotiations to purchase Arm for a staggering $40 billion. Unlike chip giant Intel or fabless AMD, which both mostly design products to sell to customers and consumers, Arm’s primary business is to design processors and instruction sets which are then licensed to companies such as Apple, Samsung, Qualcomm, and thousands of others. Arm-based chips are in the vast majority of the world’s smartphones, IoT devices, and billions of other products from smart watches to data centers.

The FTC said Nvidia’s purchase would give it key insight into what its direct competitors are doing.

“Today, Arm’s licensees—including Nvidia’s rivals—routinely share competitively sensitive information with Arm. Licensees rely on Arm for support in developing, designing, testing, debugging, troubleshooting, maintaining, and improving their products, according to the complaint. Arm licensees share their competitively sensitive information with Arm because Arm is a neutral partner, not a rival chipmaker. The acquisition is likely to result in a critical loss of trust in Arm and its ecosystem,” FTC officials said.

Nvidia has long dismissed criticism from rivals about the attempted purchase and denied any speculation that competition would be hurt, especially after expending $40 billion to buy the company.

Over the last year, however, governments have lined up against the deal, with the UK’s Competition and Markets Authority criticizing it in August, as well as reported friction from Chinese regulators. With the United State’s FTC now weighing in, it’s truly international opposition to the deal between U.S.-based Nvidia and the UK-based Arm that’s owned by Japanese company Softbank.