US FTC files lawsuit to block Nvidia acquisition of Arm

The US regulator FTC has sued Nvidia over its proposed acquisition of Arm. The regulator thinks the takeover breaks the law and is bad for innovation and competition, among other things. The trial will start in August next year.

Because both Nvidia and Nvidia’s competitors rely on Arm’s chip designs in certain markets, Nvidia’s acquisition of Arm would be bad for those competitors and consumers, the FTC writes. According to the regulator, this concerns chip designs for advanced driver assistance systems, CPUs for cloud service providers and dpu SmartNICs, network products that improve the security and efficiency of data center servers.

The FTC thinks that if Nvidia acquires Arm, Nvidia will have the opportunity “and incentive” to take control of these chip designs in order to thwart competitors. According to the regulator, this could lead to less competition, lower product quality, reduced innovation, higher prices and less choice.

In addition to the immediate competition concerns, the FTC also says that the acquisition will give Nvidia access to sensitive information from competitors. These competitors share sensitive information with Arm in exchange for support in developing, maintaining and testing products. Arm is still a neutral party within the chip sector, with the acquisition of Nvidia that would no longer be the case, the FTC says in the complaint. Finally, according to the FTC, the acquisition could cause Arm to innovate less in sectors that could work against Nvidia’s interests, which in turn would hurt overall innovation within the market.

The regulator says it has worked closely with regulators in the European Union, the United Kingdom, Japan and South Korea during the investigation. The four members of the committee responsible for the investigation were also unanimous in the decision to start a lawsuit against Nvidia. The case begins on August 9.

Nvidia told CNBC, among others, that it wants to continue with the acquisition and that it wants to demonstrate that it offers benefits for the industry and promotes competition. The company says it is investing in Arms’ research division, accelerating roadmaps and expanding Arms’ ecosystem. Nvidia said last month when discussing its quarterly results that the FTC was investigating the acquisition. At that time it was not yet clear what stage the investigation was in, only that the regulator had ‘concerns’.

Not only the American regulator has started an investigation into the takeover. Both the United Kingdom and the European Commission have started investigations; both have also decided to intensify their investigations. The British competition regulator decided this in mid-November, the European Commission already started a more extensive investigation at the end of October. These parties have similar concerns to the FTC, although the UK adds that it fears for British national security.