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As Big Tech showers employees with perks to win the talent war, Nvidia built a nearly $5 trillion company by making people pay for their own lunch

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Google, Microsoft, Qualcomm protest Nvidia’s acquisition of Arm

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February 12, 2021, 3:20 PM ET
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Some of the world’s largest technology companies are complaining to U.S. antitrust regulators about Nvidia Corp.’s acquisition of Arm Ltd. because the deal will harm competition in an area of the industry that is vital to their businesses.

Alphabet Inc.’s Google, Microsoft Corp. and Qualcomm Inc. are among companies worried about the $40 billion deal and are asking antitrust officials to intervene, said people familiar with the process who asked not to be identified because they weren’t authorized to speak publicly. At least one of the companies wants the deal killed. Nvidia shares fell 1.6% in New York trading on Friday.

The acquisition would give Nvidia control over a critical supplier that licenses essential chip technology to the likes of Apple Inc., Intel Corp., Samsung Electronics Co., Amazon.com Inc. and China’s Huawei Technologies Co.

U.K.-based Arm is known as the Switzerland of the industry because it licenses chip designs and related software code to all comers, rather than competing against semiconductor companies. The concern is that if Nvidia owns Arm, it could limit rivals’ access to the technology or raise the cost of access.

Nvidia has argued that the purchase price alone means it has no incentive to mess with that neutrality but some rivals and customers are unconvinced.

“As we proceed through the review process, we’re confident that both regulators and customers will see the benefits of our plan to continue Arm’s open licensing model and ensure a transparent, collaborative relationship with Arm’s licensees,” an Nvidia spokesperson said in a statement. “Our vision for Arm will help all Arm licensees grow their businesses and expand into new markets.” Microsoft, Qualcomm and Arm declined to comment. Google didn’t immediately respond to a request for comment. CNBC reported Qualcomm’s objections earlier.

Before the deal can close, Nvidia must get through a long review process by antitrust officials in the U.S., U.K., European Union and China. Government agencies globally are in the process of reaching out to those they believe may be affected by the transaction. A groundswell of opposition from large tech companies may make it difficult to win approval, delay the process or force concessions that change the value of Arm to Nvidia.

In the U.S., the deal is under review by the Federal Trade Commission, which has opened an in-depth investigation of the merger and has sent information demands to third parties, according to a person familiar with the matter. The FTC declined to comment.

The changing leadership of the FTC could make winning approval tougher for Nvidia. The commission is generally split 2-2 along party lines at the moment, with Democratic commissioner Rebecca Kelly Slaughter holding the acting chair position. Power will shift to the Democrats when U.S. President Joe Biden picks two candidates to fill an open seat and the seat held by Commissioner Rohit Chopra, who has been nominated to take over the Consumer Financial Protection Bureau.

Deals like Nvidia’s acquisition of Arm, known as vertical mergers, are typically seen as less worrisome in the eyes of antitrust enforcers because the companies don’t compete head to head. But that view has come under fire from advocates of more aggressive antitrust enforcement who say regulators have downplayed the competitive harm from such deals.

Slaughter’s elevation signals a tougher approval process for vertical deals. Before taking over the agency, Slaughter criticized new guidelines issued last year by the FTC and the Justice Department outlining how the agencies would evaluate vertical deals. She said the guidelines overemphasize the potential benefits of such mergers and are “inexplicably mute” about the harms.

In December, Slaughter and Chopra said companies should no longer rely on the guidelines as an indication of how the FTC will police vertical deals.

“Moving forward, we need to aggressively enforce against the harms of vertical mergers,” they wrote. “We look forward to turning the page on the era of lax oversight and to beginning to investigate, analyze, and enforce the antitrust laws against vertical mergers with vigor.”

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