Nvidia Stands by Proposed $40B Arm Buy, as FTC Sues to Block It

As Nvidia moves “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,” emailed a company spokesperson. Nvidia’s ambitions are to “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,” he said. The company “is committed to preserving Arm’s open licensing model and ensuring that its IP is available to all interested licensees, current and future,” he said.

FTC regulators “have expressed concerns regarding the transaction,” Nvidia Chief Financial Officer Colette Kress told analysts on a Nov. 17 earnings call. “We are engaged in discussions with them regarding remedies to address those concerns,” she said then. “Despite these concerns and those raised by some Arm licensees, we continue to believe in the merits and the benefits of the acquisition to all.”

The FTC’s complaint alleges the transaction will harm competition “by giving Nvidia access to the competitively sensitive information of Arm’s licensees, some of whom are Nvidia’s rivals,” said the agency. That likely will “decrease the incentive for Arm to pursue innovations that are perceived to conflict with Nvidia’s business interests,” it said.

Arm’s licensees, including Nvidia’s rivals, “routinely share competitively sensitive information with Arm,” and they do so because Arm “is a neutral partner, not a rival chipmaker,” said the FTC. “The acquisition is likely to result in a critical loss of trust in Arm and its ecosystem.” The FTC commissioners voted 4-0 to approve the complaint.

The agency 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,” said FTC Bureau of Competition Director Holly Vedova. “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 lawsuit “should send a strong signal” that the FTC “will act aggressively to protect our critical infrastructure markets from illegal vertical mergers that have far-reaching and damaging effects on future innovations,” said Vedova. President Joe Biden’s July 9 executive order on promoting competition said it will be administration policy “to enforce the antitrust laws to meet the challenges posed by new industries and technologies.” Though decades of industry consolidation “have often led to excessive market concentration,” the EO “reaffirms” that the U.S. “retains the authority to challenge transactions whose previous consummation was in violation of the Sherman Antitrust Act,” it said.

The FTC, under the leadership of Chair Lina Khan, "took a first step to rebuilding the semiconductor industry of the United States and Europe by blocking a dangerous merger between two of the world’s largest semiconductor corporations," said Open Markets Executive Direct Barry Lynn. “The move helps to establish a framework and set a tone for other law enforcers in the U.S. and Europe, and delivers notice to Wall Street raiders that they will no longer be permitted to extract wealth from -- and destroy the skills and capacities -- of vital industrial firms."

The Nvidia complaint “is not available yet” for public view, emailed an agency spokesperson Thursday. “It takes a few days to do the redactions of sensitive business information and make it a public document.” The case will be heard in an administrative law court, she said.