CMA urges further scrutiny of Nvidia purchase of Arm

The Competition and Markets Authority (CMA) has decided that an in-depth investigation into the proposed acquisition of UK chip design company Arm by US chipmaker Nvidia should go head on competition grounds.

The CMA sent a report on the matter to digital secretary Oliver Dowden on 20 July 2021, and has now published the executive summary of it.

The acquisition has become one emblem of a wave of foreign takeovers of UK companies. The report summary was published only three days after it was announced that a British supplier to the Royal Navy, Ultra Electronics, had sold itself to Cobham, a competitor owned by US private equity group Advent.

Arm itself was acquired by Japanese technology firm SoftBank Group in 2016 for £24bn. Nvidia expressed its intention to buy Arm in September 2020 for £31bn, with the declared hope that its purchase would put it at the cutting edge of artificial intelligence for edge computing.

With respect to Nvidia’s proposed acquisition of Cambridge-born Arm, the CMA has expressed concern 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 are 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.”

According to a Department for Digital, Culture, Media and Sport statement on the publication of the CMA report summary, Nvidia had offered a so-called “behavioural remedy” to alleviate concerns, but the CMA found this inadequate.

The CMA is therefore saying that the proposed merger should receive an in-depth “phase 2” investigation.

Dowden had issued a public interest intervention notice in relation to the merger in April 2021 on grounds of national security.

The CMA has provided him with a report on its competition findings, along with a summary of representations received from third parties that relate to the national security public interest consideration.

Dowden will decide whether the merger should be referred for further investigation on both competition and national security grounds, or whether it should be passed back to the CMA to investigate the matter solely on competition grounds.

The CMA said it had been working closely other competition authorities internationally to consider the impact of the deal.

On 19 August, the Financial Times reported that Nvidia CEO Jensen Huang was “confident” that regulators, including in China as well as in the UK, would give the go-ahead to the transaction, albeit on a longer timescale than the US chipmaker would like.