FTC sues to halt Nvidia’s $40B merger with UK chip supplier

The Federal Trade Commission sued to block Santa Clara-based chip supplier Nvidia Corp.’s $40 billion acquisition of U.K. chip designer Arm Ltd., the agency announced Thursday.

The proposed vertical deal between Nvidia and Arm would give one of the largest chip companies control over the computing technology and designs that rival firms use to develop competing chips, according to the announcement.

“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 the announcement. “This proposed deal would distort Arm’s incentives in chip markets and allow the combined firm to unfairly undermine Nvidia’s rivals.”

The combined firm would have “the means and incentive” to stifle innovative technologies, including those used to run data centers and driver-assistance systems in cars, the announcement stated.

The commission voted 4-0 to issue the administrative complaint, but it will not be made public until next week.

“It takes a few days to do the redactions of sensitive business information and make it a public document,” said FTC spokeswoman Betsy Lordan.

The administrative trial is scheduled to begin on Aug. 9, 2022, according to Thursday’s announcement.

The commission said Nvidia’s acquisition will harm competition in three international markets in which the chip supplier competes using Arm-based products.

High-Level Advanced Driver Assistance Systems used in computer-assisted driving functions, such as automated lane changing and collision prevention; data processing units called SmartNICs, which are advanced networking products used to increase the security and efficiency of data center servers; and Arm-based central processing units for cloud computing service providers, according to the announcement.

“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,” Vedova said.

After being appointed the youngest FTC chair in history in June, Lina Khan, 32, vowed to ramp up antitrust enforcement despite Amazon and other tech companies calling for her recusal.

Signaling a stricter brand of antitrust enforcement, the FTC voted 3-2 in September to rescind the Vertical Merger Guidelines that had allowed for mergers of businesses at different levels of the supply chain.

Federal antitrust enforcement has not been particularly strict in recent decades regarding mergers between companies that do not compete directly against each other — such as a computer manufacturer acquiring a parts supplier. But under Khan, the FTC has pursued an aggressive enforcement agenda, potentially reducing consolidation in various industries.