The UK’s Competition and Markets Authority said on Friday that an in-depth investigation of Nvidia’s proposed takeover of chip maker Arm is warranted as it could lessen competition.
The watchdog argued that if the deal goes ahead, the merged business would have the ability and incentive to harm the competitiveness of Nvidia’s rivals by restricting access to Arm’s intellectual property (IP). Arm’s IP is used by companies that produce semiconductor chips and related products, in competition with Nvidia.
“Ultimately, the CMA is concerned this loss of competition could stifle innovation across a number of markets, including data centres, gaming, the ‘internet of things’, and self-driving cars,” it said. “This could result in more expensive or lower quality products for businesses and consumers.”
Nvidia has offered a behavioural remedy – a measure which regulates the ongoing behaviour of a business – but the CMA said this type of remedy would not alleviate its concerns. As a result, it has decided the merger should be progressed to a Phase 2 investigation.
CMA chief executive Andrea Coscelli said: “We’re concerned that Nvidia controlling Arm could create real problems for Nvidia’s rivals by limiting their access to key technologies, and ultimately stifling innovation across a number of important and growing markets. This could end up with consumers missing out on new products, or prices going up.
“The chip technology industry is worth billions and is vital to products that businesses and consumers rely on every day. This includes the critical data processing and datacentre technology that supports digital businesses across the economy, and the future development of artificial intelligence technologies that will be important to growth industries like robotics and self-driving cars.”
Nvidia announced last September that it had agreed to buy Arm from Japan’s SoftBank for $40bn.
Neil Wilson, chief market analyst at Markets.com, said: “The CMA itself cites grave competition concerns – notably the fact that Arm’s tech is used by various chipmakers in competition with Nvidia.
“But we also know there are national security concerns, too, and a public interest test is already being applied to the deal. Secretary of state Oliver Dowden will decide whether the merger should be referred for an in-depth Phase 2 investigation on both competition and national security grounds, or if it should be passed back to the CMA to investigate on competition grounds only. Either should be enough to block you feel.”
What is unclear is the extent to which this signals unease in Whitehall about UK plc being on sale, Wilson said.
“The CMA is only reviewing from a competition point of view at present. That alone may be enough to scupper Nvidia’s advances. But several deals have lately caught the attention and there is a sense of there being a raid on top British companies.
“Tory governments don’t like to be too interventionist – Britain is open for business and all that – but they also don’t like to appear asleep at the wheel when blue chips get hoovered up. Whether it’s Morrisons, Vectura Meggitt or Ultra Electronics, the raiders seem to be picking up assets on the cheap.
“Does the CMA’s escalation tell us something is afoot in Whitehall to stop them? Maybe, but the CMA has only a narrow competition mandate at this point. But we do know the Ultra Electronics deal with US private equity-owned Cobham is being investigated, too. Advent has already sold off a good chunk of the old Cobham – why should Ultra be fed to the wolves as well? Hopefully the government is starting to show a bit more backbone.”
