The U.S. Federal Trade Commission has sued to block U.S. chip company Nvidia Corp’s more than $80 billion planned acquisition of British chip technology provider Arm, adding to already significant global regulatory challenges of the deal.
The FTC said the proposed deal would give one of the largest chip companies control over computing technology and designs that competitors rely on to develop their own competing chips.
The deal has been widely expected to fall apart after facing opposition in the chip industry.
British regulators said last month they would launch an in-depth probe of the deal, and it is also under scrutiny in the European Union.
Arm licenses its chip architecture and blueprints to major chipmakers Apple Inc, Qualcomm Inc and Samsung Electronics Co Ltd, underpinning the global smartphone ecosystem. Arm was sold to Japan’s SoftBank in 2016.
Nvidia said it would “work to demonstrate that this transaction will benefit the industry and promote competition.”
The stock-heavy deal has more than doubled in value since it was announced in September 2020 as Nvidia shares have risen on the performance of its data centre business. Nvidia will owe only a $1.25 billion breakup fee if the deal does not close, and its shares closed up 2.2% at $321.26.
The FTC, which is made up of two Republicans and two Democrats, voted 4-0 to approve the challenge to the planned merger.
The FTC alleged, “the proposed merger would give Nvidia the ability and incentive to use its control of this technology to undermine its competitors, reducing competition and ultimately resulting in reduced product quality, reduced innovation, higher prices, and less choice, harming the millions of Americans who benefit from Arm-based products.”
The FTC added the combined firm “would have the means and incentive to stifle innovative next-generation technologies, including those used to run data centres and driver-assistance systems in cars.”
The FTC said it has cooperated closely with the staff of the competition agencies in the European Union, United Kingdom, Japan, and South Korea.