European Commission to investigate Nvidia ARM acquisition in more detail

The European Commission has launched a more extensive competition investigation into Nvidia’s proposed Arm acquisition. The Commission says it fears that the acquisition could lead to higher prices and reduced innovation in the chip sector.

Margrethe Vestager, Vice-President of the European Commission, writes in a press release that the acquisition may have an anticompetitive effect, according to the EU. “While Arm and Nvidia do not compete directly with each other, Arm’s intellectual property is an important input into products that do compete with Nvidia’s, such as for data centers, the automotive sector and IoT,” said Vestager.

The EU concluded in an initial analysis that Arm has ‘significant market power’ in licensing processor technologies. The Commission is therefore concerned that Nvidia may restrict access to Arm’s licenses for its competitors and is therefore looking at the acquisition in more detail. The EU argues that Nvidia may have economic incentives to implement such barriers in practice, which could distort competition in the chip sector.

In its in-depth investigation, the Committee wants to map out the consequences of the transaction, among other things, in order to verify whether these objections are confirmed. The EU will also investigate whether the acquisition could “stifle” innovation in the semiconductor sector, as Arm licensees may be more reluctant to share sensitive information with the merged Nvidia and Arm in the future.

The European Commission launched its first investigation in early September and announced in early October that this initial investigation phase would be extended for a few weeks. Nvidia then offered the EU to make concessions in the acquisition, but the EU now writes that these concessions are insufficient to allay the Commission’s ‘serious doubts’.

The deadline for the extensive investigation is currently March 15, 2022. That is a setback for Nvidia, which hopes to complete the acquisition by March 2022. In addition to the EU, the deal is also under scrutiny by other regulators, including in the UK, US and China.

The British market watchdog is also critical of the takeover, and has previously indicated that it wants an in-depth investigation into its potential consequences. In early August, Bloomberg wrote that the UK may want to block the ARM takeover on the grounds of “potential risks to national security.” The Information wrote earlier this year that China plans to “delay” the acquisition.

Arm’s customers and Nvidia’s competitors have also expressed criticism of the proposed acquisition in recent months. Among other things, they fear that this will jeopardize Arm’s open licensing model, as stated in the EU’s initial objections. Companies such as Microsoft, Google and Qualcomm have raised concerns with regulators.