US FTC becomes the latest regulator seeking to block Nvidia's $40bn Arm acquisition

What would be the largest ever semiconductor merger is causing anti-competition concerns around the world

The US Federal Trade Commission (FTC) has filed a lawsuit to block Nvidia's $40 billion (£30 billion) acquisition of Arm.

In doing so, the US regulator joins its counterparts in the UK and the EU in seeking to prevent the acquisition - which would be the largest such merger in history - on competition grounds.

Arm designs and licenses chips that are widely used in many consumer and industrial technologies. Companies including Apple, Samsung, AMD and Qualcomm use Arm technology to produce their own processors. Nearly every smartphone in the world uses Arm's chip designs, and they are also widely used in laptops, connected cars and IoT devices.

The FTC says the proposed merger would allow Nvidia too much control over the supply of chips and designs used by its competitors.

"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 said in a statement.

FTC director Holly Vedova went further: "The FTC is suing to block the largest semiconductor chip merger in history to prevent a chip conglomerate from stifling the innovation pipeline for next-generation technologies. Tomorrow's technologies depend on preserving today's competitive, cutting-edge chip markets.

Vedova continued: "This proposed deal would distort Arm's incentives in chip markets and allow the combined firm to unfairly undermine Nvidia's rivals. The FTC's lawsuit should send a strong signal that we will act aggressively to protect our critical infrastructure markets from illegal vertical mergers that have far-reaching and damaging effects on future innovations."

The US regulator also said the acquisition could allow Nvidia access to its competitors designs.

Nvidia said: "As we move into this next step in the FTC process, we will continue to work to demonstrate that this transaction will benefit the industry and promote competition."

The move to sue Nvidia was unanimously agreed by the regulator's bipartisan committee. The case will go to court in August 2022.

The FTC's move follows similar action by the UK and the EU.

In November, the British government said it would order a probe into the deal over antitrust and national security concerns, and in October the European Commission launched its own detailed investigation into the merger, saying it was concerned that the acquisition could lead to reduced innovation, less choice and higher prices in the semiconductor industry.

UK chip designer Arm was sold to Japan's SoftBank in 2016, with SoftBank having plans to take it public before Nvidia stepped in with its $40 billion offer in September 2020. The offer triggered a backlash from rivals, politicians and customers. Nvidia is itself an Arm licensee, prompting fears that it could give itself preferential treatment. Other licensees were concerned that it could impact Arm's position as a neutral supplier.

However, some chipmakers, including Broadcom, Marvell and MediaTek, said they supported the deal.

Given the forces lined up against it, it is increasingly unlikely that Nvidia's acquisition of Arm will go ahead.