- Nvidia revealed that it will acquire Arm Limited for $40 billion back in September.
- The Competition and Markets Authority (CMA) began an investigation into the deal.
- Nvidia’s rivals have called for the blocking of the contract.
A regulatory inquiry was only a matter of time for Nvidia. The company revealed that it had reached an agreement to buy Arm Limited for $40 billion. The announcement was made back in September. And lo, the Competition and Markets Authority (CMA) started a probe in the matter. The United Kingdom authority has begun inviting third parties to determine how the agreement could impact competition ahead. The inquiry is scheduled to begin later this year.
It was not exactly a good time for giant tech mergers. Nvidia’s acquisition of Arm counts as an extremely big merger with a far-reaching effect. For instance, the CPU architecture of Arm is in almost every device that you use on a daily basis, while the king of GPUs is Nvidia. While Arm does not technically produce chips itself, it licenses its technology to other major players. These include Apple, Intel, Samsung, Qualcomm, and Huawei. Also, it suggests that very few businesses may actually purchase Arm. And that too without triggering the anti-trust radars of regulatory bodies.
Nvidia’s $40 billion acquisition of Arm, as expected, is nowhere near a done deal. The EU and UK have begun investigating the merger, The Irish Times reports. The agreement would be extensively investigated and could either be passed unconditionally or with compromises. The investigation comes in response to concerns that the agreement would grant Nvidia monopolistic control over current Arm licensees.
CMA’s take on the merger
The CMA says it aims to investigate the effect on competition within the UK of the Nvidia-Arm contract. In particular, the CMA is interested in whether Arm will have “an incentive to withdraw, increase prices, or decrease the quality of its IP licensing services to Nvidia’s rivals after the acquisition.” Back in September, Nvidia had pre-emptively attempted to appease regulatory bodies by promising to keep Arm based in the UK, as well as sticking to its “open-licensing model” and “global customer neutrality”
The investigation is only starting, sources add, as the paperwork has not yet been filed in Brussels. Currently, the UK Competition and Markets Regulator are gathering statements from different firms about their views on the acquisition. Nvidia’s rivals have called for stopping the transaction in the past, so it seems likely that such comments would contain the same or similar feelings.
In a letter to the UK Foreign Affairs Committee last year, Arm co-founder Hermann Hauser wrote that allowing Nvidia to purchase ARM would “give Nvidia a dominant position in all processor segments and create another U.S. technology monopoly.” If the deal were to be accepted, it would only intensify Britain’s fears regarding tech giants such as Google, Facebook, Netflix, and the influence of Amazon. Nvidia is one of 500 worldwide Arm licensees. If Arm was purchased by Nvidia, it will become the licensor of those contracts. Rivals of Nvidia have called for the blocking of the contract.
Nvidia’s Response to the Investigation
Jensen Huang, CEO of Nvidia, had previously told the Financial Times that “Nvidia will maintain the open licensing model of Arm,” and that it has no intention of “throttling” or “denying” the supply of Arm to any client.
An Nvidia spokesperson told Fortune, “The regulatory process is proceeding as we planned,” and that the company “understands fully that this transaction will be reviewed in detail by the relevant governments and regulators, as they should, given the importance of the deal.” Nvidia remains optimistic that to complete the acquisition, it will obtain the requisite regulatory approvals.
But if you don’t quite believe that, it’s understandable, because tech companies have agreed to terms as part of a merger in the past, only to ignore them later. For example, when it bought the messaging network in 2014, Facebook said it would not match WhatsApp and Facebook user accounts, but it later went back on its pledge.
