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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  • meacupla - Thursday, December 2, 2021 - link

    Ah, so even the US FTC agrees that nvidia-arm would be bad for business.

    I wonder if EU will go for litigation as well, instead of only probing.
    Reply
  • boozed - Thursday, December 2, 2021 - link

    In the EU they probably only have to say "nope". Reply
  • Zoolook - Wednesday, December 8, 2021 - link

    Before Brexit, yes, since Arm Holdings is in GB, but now, they can't say anything about the purchase only about how it will affect Nvidia+Arm doing future business in the EU. Reply
  • ikjadoon - Friday, January 21, 2022 - link

    I'd hazard a guess that "future business in the EU" is a top priority for both Arm Ltd. and NVIDIA.

    Brexit just makes it worse for Arm, tbh. Now Arm Ltd. must get approval from the UK's CMA (already investigating) and the EUMR (already investigating).
    Reply
  • mode_13h - Thursday, December 2, 2021 - link

    Perhaps Synopsis + ARM would make more sense. Not that the former has the wherewithal to swing the kind of acquisition price that Nvidia offered, but they could always do a merger.

    Other thoughts about ARM's prospects: the IPO route should still be viable, if Softbank remains eager to offload it. And I guess there are other private equity or sovereign wealth funds that could afford it? It'd be pocket change for Berkshire Hathaway.
    Reply
  • SarahKerrigan - Friday, December 3, 2021 - link

    Synopsys already owns ARC, so it could either be good because it's an area they're already experienced in, or bad because it's one company picking up multiple embedded ISAs. Reply
  • ikjadoon - Thursday, December 2, 2021 - link

    This deal has exposed a lot of terrible trends, all in one go!

    1) Selling off national treasures to international mega-conglomerates with zero foresight and zero spine. Don't forget that Arm got a massive check with Soft Bank's valuation + acquisition: they're no innocent player here.

    2) Incompetent equity firms embarrassing themselves in a market with zero understanding and losing billions in widely-publicized regulatory scrutiny, stunning loss of value, and another slap across the face at the billionaires club.

    3) Stunning levels of blatant trusts / anti-competitive behavior, with plenty clapping along the sidelines, i.e., Marvell, Broadcom, and MediaTek that *all* voiced public support for this horrific deal.

    4) That, in the end, it was probably only Google + Apple + Microsoft + Qualcomm + others opposition that caused the FTC to intervene. So, as some have written, when trillionaires and billionaires fight, there is only one winner and it's only luck that the trillionaires aligned with the consumers this time.
    Reply
  • ikjadoon - Thursday, December 2, 2021 - link

    But otherwise, the best news of December yet. Gotta love reading that headline first thing in the morning. Reply
  • mode_13h - Friday, December 3, 2021 - link

    > 1) Selling off national treasures to international mega-conglomerates

    ARM was publicly traded. It IPO'd and traded in London and on NASDAQ in 1998. Are you saying all the shareholders should've collectively refused Softbank's acquisition?

    And if what you really mean is that ARM shouldn't have IPO'd, that's a bit unfair. We can't really say where they'd be, if they hadn't done it.

    > 2) Incompetent equity firms embarrassing themselves in a market with zero
    > understanding and losing billions in widely-publicized regulatory scrutiny,
    > stunning loss of value, and another slap across the face at the billionaires club.

    Are you talking about WeWork? Because that's why Softbank needed money enough to sell ARM. ARM is still probably a good long-term bet.
    Reply
  • Drae - Friday, December 3, 2021 - link

    > ARM was publicly traded. It IPO'd and traded in London and on NASDAQ in 1998. Are you
    > saying all the shareholders should've collectively refused Softbank's acquisition?

    I suspect he's saying UK Government should not have allowed the sale to go ahead to begin with - as they are minded to now do with Nvidia (something about a horse and a stable door).

    But this begs a much wider and more difficult question re: the UK Governments longstanding and ongoing inability to handle anything to do with tech beyond bluff and bluster (and the ability of whatever it is to get them and the high ranking civil servants jobs in cushy financial consultancies when they quit/are forced out/unelected).
    Reply

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