The FTC is suing Nvidia’s purchase of Arm. for $40 billion

Nvidia’s $40 billion acquisition of Arm just ran into another huge hurdle: the Federal Trade Commission, which was announced today that it is pursuing a lawsuit to prevent the merger from going through over concerns that the combined companies would “stifle competing next-generation technologies.” The lawsuit comes following an FTC investigation into the deal following complaints from Google, Microsoft and Qualcomm shortly after the merger was announced.

“The FTC is suing to block the largest semiconductor chip merger in history to prevent a chip conglomerate from choking the innovation pipeline for next-generation technologies,” said Holly Vedova, director of the FTC Bureau of Competition. “Tomorrow’s technologies depend on maintaining today’s competitive, advanced chip markets. This proposed deal would disrupt Arm’s incentives in the chip markets and allow the combined company 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.”

The FTC’s complaint notes that Nvidia is already using Arm-based products for several areas, including advanced, high-level vehicle driver systems, Arm-based CPUs for cloud computing, and DPU SmartNICs (networking products used in data centers). The concern is that by acquiring Arm, Nvidia would gain an unfair advantage in those markets.

In addition, the FTC is concerned that Nvidia would gain access to sensitive information from Arm licensees who already compete with Nvidia, in addition to discouraging work on new products and designs that would conflict with Nvidia’s own interests by favoring competitors.

Nvidia, for its part, has promised to keep Arm’s existing open licensing model, with the company providing semiconductor designs to a huge list of companies, including Apple, Qualcomm, Samsung, Amazon, and more. Nvidia CEO Jensen Huang wrote in a Financial times editorial that he could “state unequivocally that Nvidia will maintain Arm’s open licensing model. We have no intention of ‘stopping’ or ‘refusing’ delivery of Arm to any customer.”

The FTC isn’t the only regulator closely scrutinizing the $40 billion deal: The European Union opened a formal investigation into the deal in October, while the UK’s Competition and Markets Authority began a more in-depth investigation into possible national security and competition concerns last month.

Huang acknowledged in August that the regulatory review would likely take longer than the company’s originally estimated 18-month period, but told the Financial times Which “[we’re] confident in the deal, we believe regulators should recognize the benefits of the acquisition.” The original plan was to complete the merger in March 2022 (although Nvidia’s deal with Softbank gives it until the end of the year to settle things with regulators). But with the FTC filing a lawsuit to block the deal, it seems that Nvidia and Arm’s list of hurdles just got much longer.