European Union Regulators Open Probe Into NVIDIA-Arm Acquisition

Following an extended period of regulatory uncertainly regarding NVIDIA’s planned acquisition of Arm, the European Union executive branch, the European Commission, has announced that they have opened up a formal probe into the deal. Citing concerns about competition and the importance of Arm’s IP, the Commission has kicked off a 90 day review process for the merger to determine if those concerns are warranted, and thus whether the merger should be modified or blocked entirely. Given the 90 day window, the Commission has until March 15^th of 2022 to publish a decision.

At a high level, the EC’s concerns hinge around the fact that Arm is an IP supplier for both NVIDIA and its competitors. Which has led the EC to be concerned about whether NVIDIA would use its ownership of Arm to limit or otherwise degrade competitors’ access to Arm’s IP. This is seen as an especially concerning scenario given the breadth of device categories that Arm chips are in – everything from toasters to datacenters. As well, the EC will also be examining whether the merger could lead to NVIDIA prioritizing the R&D of IP that NVIDIA makes heavy use of (e.g. datacenter CPUs) to the detriment of other types of IP that are used by other customers.

It is worth noting that this is going to be a slightly different kind of review than usual for the EC. Since NVIDIA and Arm aren’t competitors – something even the EC notes – this isn’t a typical competitive merger. Instead, the investigation is going to be all about the downstream effects of a major supplier also becoming a competitor.

Overall, the need for a review is not terribly surprising. Given the scope of the $40 billion deal, the number of Arm customers (pretty much everyone), and the number of countries involved (pretty much everyone again), there was always a good chance that the deal could be investigated by one or more nations. Still, the EC’s investigation means that, even if approved, the deal will almost certainly not close by March as previously planned.

"Semiconductors are everywhere in products and devices that we use everyday as well as in infrastructure such as datacentres. Whilst Arm and NVIDIA do not directly compete, Arm's IP is an important input in products competing with those of NVIDIA, for example in datacentres, automotive and in Internet of Things. Our analysis shows that the acquisition of Arm by NVIDIA could lead to restricted or degraded access to Arm's IP, with distortive effects in many markets where semiconductors are used. Our investigation aims to ensure that companies active in Europe continue having effective access to the technology that is necessary to produce state-of-the-art semiconductor products at competitive prices."
-Executive Vice-President Margrethe Vestager

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