On February 7, 2022, NVIDIA announced the termination of its agreement to acquire Arm Limited (“Arm”), a UK-based semiconductor design company of the SoftBank Group.[1] Following its announcement in September 2021, the transaction, which would have been the largest of its kind in the semiconductor sector, had attracted significant regulatory interest across the globe.

NVIDIA develops and supplies processor products for various applications, including in data centers, Internet of Things, automotive applications and gaming. Arm licenses out intellectual property for processing units, in particular to semiconductor chipmakers and Systems-on-Chip developers. The Commission investigated whether NVIDIA might get an unfair advantage over its rivals by having access to Arm’s technology, particularly for smart network interconnect cards, high-level advanced driver assistance systems for passenger cars, and Arm-based CPUs for cloud computing service providers.

The Commission started an in-depth Phase II probe in October 2021 (which was subject to a stop-the-clock suspension of seven weeks). The U.S. FTC issued an extended Second Request in December 2020 (i.e., the equivalent of an in-depth Phase II review in Europe), and decided to sue to block the transaction in December 2021. This despite NVIDIA’s offer of a structural remedy that would have split Arm’s intellectual property licensing into a separate entity.[2] In addition, in November 2021, the UK Digital and Culture Secretary had also ordered a Phase II review by the CMA on competition and national security grounds. And China’s competition regulator, the State Administration for Market Regulation, accepted the formal notification of the transaction only in January 2022.

NVIDIA’s abandonment of the deal, worth $40 billion at signing, highlights the increasing scrutiny of vertical mergers. The U.S. FTC withdrew the Vertical Merger Guidelines in September 2021, only a year after its publication, arguing that it included unsound economic theories that are unsupported by the law or market realities.

On January 18, 2022, the U.S. FTC and the U.S. Department of Justice announced a joint initiative to conduct a comprehensive analysis of their merger guidelines, which is likely to further increase enforcement in vertical mergers, particularly in the digital sector. And the CMA recently ordered Meta to reverse its acquisition of the animated GIF platform Giphy, on the basis of a vertical input foreclosure theory in the supply of social media. It remains to be seen whether the Commission’s extensive review of the NVIDIA/ Arm transaction is a precursor to an increasing scrutiny of vertical mergers under the EU merger control regime.


Editors: Conor Opdebeeck-Wilson and Thorsten Schiffer

[1] NVIDIA Press Release, “NVIDIA and SoftBank Group Announce Termination of NVIDIA’s Acquisition of Arm Limited,” February 7, 2022.

[2] FTC Sues to Block $40 Billion Semiconductor Chip Merger, FTC, December 2, 2021, available at: https://www.ftc.gov/news-events/news/press-releases/2021/12/ ftc-sues-block-40-billion-semiconductor-chip-merger. See also, Nvidia-Arm deal blocked by US FTC, remedies didn’t address concerns, MLex, December 3, 2021, available here.