FTC Sues to Block Nvidia's $40B Deal to Acquire Arm

The Federal Trade Commission has sued to block Nvidia's $40 billion acquisition of British chip design provider Arm, the United States government independent agency announced Friday.

The complaint names Nvidia Corp., Arm Ltd., and Arm owner Softbank Group Corp, and was put into action after all four of the FTC's commissioners voted against the proposed merger. The administrative trial is scheduled to begin Aug. 9, 2022.

According to the FTC, the $40B semiconductor chip merger would allow Nvidia to "stifle competing next-generation technologies."

“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 statement. “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.”

Among the points arguing how the merger would result in competitive harm, the FTC also emphasized that Arm creates and licenses microprocessor designs and architectures to a handful of tech companies (including Nvidia), rather than supplying or marketing finished computer chips or devices of its own.

In Sept. 2020, Nvidia first announced its deal to acquire Arm from SoftBank, which paid $31 billion for it back in 2016.

"The combination brings together NVIDIA’s leading AI computing platform with Arm’s vast ecosystem to create the premier computing company for the age of artificial intelligence," the Nvidia press release read, "accelerating innovation while expanding into large, high-growth markets. SoftBank will remain committed to Arm’s long-term success through its ownership stake in NVIDIA, expected to be under 10 percent."

Shortly after the merger was announced, however, complaints from Microsoft, Google, Qualcomm, and others prompted the FTC to conduct an investigation into the deal.

In a statement to PC Gamer, an Nvidia spokesperson said that the company will "continue to work to demonstrate that this transaction will benefit the industry and promote competition."

"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," the spokesperson said. "Nvidia is committed to preserving Arm’s open licensing model and ensuring that its IP is available to all interested licensees, current and future."