UK watchdog flexes muscles over Nvidia's Arm deal

The UK's Competition and Markets Authority (CMA) indicated that an in-depth investigation into the proposed takeover of chipmaker Arm and Nvidia would be necessary because the deal "raises serious competition concerns."

The CMA has just published a summary of its phase one report, which was sent to Oliver Dowden, Secretary of State for Digital, Culture, Media and Sport, in July. It will now be up to Dowden to decide whether a phase two investigation is required.

The CMA's executive summary includes its assessment on jurisdictional and competition issues. The government has also separately been considering the national security implications of the transaction.

In April, Dowden issued a public interest intervention notice, invoking legal powers that let government ministers intervene in overseas takeovers on national security grounds, and give them quasi-judicial powers.

Nvidia made its $40 billion move for Arm – a British company that is nevertheless owned by Japan's SoftBank – last September. It had hoped to wrap up the approval process within about 18 months from signing the deal, but regulatory hurdles were always going to be its biggest problem. Indeed, Jensen Huang, the CEO of Nvidia, has already conceded that the process is likely to take longer than hoped.

Other chip companies that use Arm's designs have already complained about the purchase. China also launched an investigation in June that could take 18 months.

Cause for concern

The CMA said it is worried that 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.

Andrea Coscelli, chief executive of the CMA, 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."

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Here, Coscelli seems to be referring to the worry among many industry watchers that Nvidia, should its takeover plan be successful, will rip up Arm's neutral licensing model.

The thinking here is that Nvidia would have little obvious incentive to see Arm's technology sold to its competitors. Another worrying possibility is that Arm's customers might balk at paying a rival, forcing up prices as they look for alternatives.

While Nvidia had offered remedies to lessen the impact, the UK regulator did not believe they would alleviate its concerns.

Speaking earlier in August, Huang still said he was "confident" that regulators would ultimately approve the acquisition. Nvidia's deal with SoftBank Group gives it until the end of 2022 to complete the acquisition.

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— Anne Morris, contributing editor, special to Light Reading