Click here for a confidential contact or call:


FTC Seeks to Maintain the Neutrality of the “Switzerland” of the Computing Industry by Suing to Block Nvidia’s Deal to Buy Arm

Posted  December 9, 2021
By David A. Scupp

The Federal Trade Commission launched a battle to preserve competition in multiple computing markets last week with the filing of a complaint seeking to block Nvidia Corporation’s $40 billion acquisition of Arm, Ltd.

In bringing this action, the FTC makes clear that the days of federal regulators giving vertical mergers an automatic pass are over.

Nvidia is one of the world’s largest computing companies.  It manufactures a variety of computing products, including several types of computer chips.  Arm develops and licenses technology to computing companies, including Nvidia.

According to the FTC, Arm’s technology “is at the foundation of many innovative products of our modern digital age, including nearly every smartphone on the market, advanced driver assistance features in recent and upcoming cars, web servers that can provide significantly better cost performance over the most comparable non-Arm servers, and many other examples.”  The FTC claims that Arm’s technology is a “critical input” into the computing products that Nvidia and its competitors produce, and the “de facto industry standard for CPU processor technology contained in billions of computer chips worldwide.”

In September 2020, Nvidia announced it would acquire Arm for $40 billion.  On December 2, 2021, the FTC filed a complaint before the Commission seeking to block the acquisition.  The FTC alleges that the acquisition will substantially lessen competition in three computing technology markets: DPU SmartNICs; High-Level Automotive Advanced Driver Assistance System Central Compute SoCs; and Arm-Based Datacenter CPUs for Cloud Computing Service Providers.

According to the FTC, Arm uses an industry-described neutral open licensing approach that has led it to being dubbed the “Switzerland” of the semiconductor industry.  Not only does Arm license its technology to more than a thousand licensees, it regularly receives their sensitive business information.  Arm also works with its licensees to improve their products and boost sales of products that incorporate Arm’s technology in downstream markets.

The FTC claims the proposed acquisition would put this procompetitive ecosystem in jeopardy because it would “create a combined firm that has both the ability and the incentive to use its control of Arm to diminish competition by undermining Nvidia’s rivals.”  Nvidia could allegedly engage in such anticompetitive behavior by “manipulating levers such as Arm’s pricing, the timing of access to Arm’s Processor Technology (including withholding or delaying access), Arm’s technological developments and features, and Arm’s provision of service and support.”  Such anticompetitive behavior would stifle the innovation that is currently flourishing due to Arm’s technology and neutral posture and give Nvidia an anticompetitive edge over its rivals.

This blog has previously noted that FTC challenges to vertical mergers are exceedingly rare.  In August, the FTC kicked off its trial challenging Illumina’s acquisition of GRAIL, Inc., making it only the second vertical merger in 40 years litigated by a U.S. enforcer.  A few weeks later, the FTC withdrew its vertical merger guidelines.  Now—only three months later—the FTC has sought to block another vertical acquisition.

When we wrote on the Illumina-Grail trial in August, this blog noted that the outcome there could send a signal about the future of the direction of vertical merger enforcement by the FTC.  It seems, however, that the FTC did not feel the need to wait until that case was decided to continue to challenge vertical mergers that may raise competitive concerns.

Written by David Scupp

Edited by Gary J. Malone

Tagged in: Antitrust Enforcement,