United States FTC Files Lawsuit to Block NVIDIA-Arm Acquisitionby Ryan Smith on December 2, 2021 7:45 PM EST
In the biggest roadblock yet to NVIDIA’s proposed acquisition of Arm, the United States Federal Trade Commission (FTC) has announced this afternoon that the regulatory body will be suing to block the merger. Citing concerns over the deal “stifling the innovation pipeline for next-generation technologies”, the FTC is moving to scuttle the $40 billion deal in order to protect the interests of the wider marketplace.
The deal with current Arm owner SoftBank was first announced in September of 2020, where at the time SoftBank had been shopping Arm around in an effort to either sell or spin-off the technology IP company. And while NVIDIA entered into the deal with bullish optimism about being able to close it without too much trouble, the company has since encountered greater political headwinds than expected due to the broad industry and regulatory discomfort with a single chip maker owning an IP supplier used by hundreds of other chip makers. The FTC, in turn, is the latest and most powerful regulatory body to move to investigate the deal – voting 4-0 to file the suit – following the European Union opening a probe into the merger earlier this fall. The
While the full FTC complaint has yet to be released, per a press release put out by the agency earlier today, the crux of the FTC’s concerns revolve around the advantage over other chip makers that NVIDIA would gain from owning Arm, and the potential for misconduct and other unfair acts against competitors that also rely on Arm’s IP. In particular, the FTC states that “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.”
To that end, the FTC’s complaint is primarily focusing on product categories where NVIDIA already sells their own Arm-based hardware. This includes Advanced Driver Assistance Systems (ADAS) for cars, Data Processing Units (DPUs) and SmartNICs, and, of course, Arm-based CPUs for servers. These are all areas where NVIDIA is an active competitor, and as the FTC believes, would provide incentive for NVIDIA to engage in unfair competition.
More interesting, perhaps, is the FTC’s final concern about the Arm acquisition: that the deal will give NVIDIA access to “competitively sensitive information of Arm’s licensees”, which NVIDIA could then abuse for their own gain. Since many of Arm’s customers/licensees are directly reliant on Arm’s core designs (as opposed to just licensing the architecture), they are also reliant on Arm to add features and make other alterations that they need for future generations of products. As a result, Arm’s customers regularly share what would be considered sensitive information with the company, which the FTC in turn believes could be abused by NVIDIA to harm rivals, such as by withholding the development of features that these rival-customers need.
NVIDIA, in turn, has announced that they will be fighting the FTC lawsuit, stating that “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.”
Ultimately, even if NVIDIA is successful in defending the acquisition and defeating the FTC’s lawsuit, today’s announcement means that the Arm acquisition has now been set back by at least several months. NVIDIA’s administrative trial is only scheduled to begin on August 9, 2022, almost half a year after NVIDIA initially expected the deal to close. And at this point, it’s unclear how long a trial would last – and how long it would take to render a verdict.
Source: United States Federal Trade Commission
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r3loaded - Friday, December 3, 2021 - linkI'd rather SoftBank just IPO it onto the LSE. Much easier than selling to another company, and it means that the rest of us will once again be able to share in Arm's success.
mode_13h - Saturday, December 4, 2021 - linkDepends. It was independent before. If spinning it out would just make it an acquisition target for someone else, then maybe it's not actually an improvement.
Lakados - Sunday, December 5, 2021 - linkLike they did with ARM-China which now sees the Chinese government with 51% of the company which is now recognized as an independent company and is now authorized to issue its own licenses independent of SoftBank’s ARM?
If this bid fails I fear for ARM, it won’t die but it’s going to get messy.
mode_13h - Sunday, December 5, 2021 - link> If this bid fails I fear for ARM, it won’t die but it’s going to get messy.
As you point out, it's already messy.
flgt - Friday, December 3, 2021 - linkGlad they are finally doing something about this. Consolidation into useless mega corporations has been terrible for consumers around the world, as well as local innovation. These deals are a big part about snuffing out competition. Wish they had acted sooner though. From the US perspective, I think a lot of damage was done to the semiconductor industry in the last 10 years.
Oxford Guy - Saturday, December 4, 2021 - linkIt strikes me as ridiculous that some of them are allowed to continue and others blocked.
Lack of adequate consistency in the application of law undermines its authority.
Can anyone provide a substantial justification for blocking this particular merger, whilst approving of the current situation vis-à-vis the continuing existence of various megacorps — some of which own extremely important things like Internet search?
mode_13h - Saturday, December 4, 2021 - link> Can anyone provide a substantial justification for blocking this particular merger,
> whilst approving of the current situation vis-à-vis the continuing existence of various megacorps
That presumes there's some sort of consensus that other big acquisitions aren't problematic. Just 1 year ago, the FTC and 46 US states sued Facebook for monopolization, particularly involving its acquisitions:
However, your question seems to presume this is being blocked on the basis of the involved firms' size. That's not actually the issue. I suggest you (re)-read the article to understand the grounds on which it's being opposed.
Oxford Guy - Saturday, December 4, 2021 - link'That presumes there's some sort of consensus that other big acquisitions aren't problematic.'
No, it doesn't. That's a different subject.
GeoffreyA - Sunday, December 5, 2021 - link"Can anyone provide a substantial justification for blocking this particular merger"
The world is willing to put up with a lot, as long as it's below a certain threshold. But when Saruman tries to take the keys to the control centre, the world isn't going to stand for that.
Oxford Guy - Sunday, December 5, 2021 - linkReferences to fantasy aren’t really so illuminating.