Published on Feb 14, 2022
Nvidia terminates Arm merger plan. Nvidia (NVDA) last week abandoned its takeover of British chip designer Arm Holdings following regulatory resistance from competition authorities in Europe and the U.S. Though its review remained at an early stage in China, the State Administration for Market Regulation (SAMR) had also been expected to raise objections to the combination—making for seemingly global antipathy toward what would have been the biggest semiconductor deal to date.
Nvidia agreed in September 2020 to buy Arm from Japan’s SoftBank Group (TYO: 9984) for $40 billion in cash and stock—a valuation that soared with Nvidia’s share price and chip demand. But the deal appeared from the outset to face insurmountable regulatory opposition.
The FTC filed a lawsuit to block the deal at the end of last year, while the European Commission and the UK’s Competition and Markets Authority voiced serious reservations and were conducting in-depth investigations into the merger.
SoftBank has now started preparations for an initial public offering of Arm. Defending the deal in front of the CMA, Nvidia had said that Arm, as a standalone company, would face “scale, scope and economic limitations.” In calling off the deal last Monday, Nvidia founder and Chief Executive Jensen Huang said that Arm had “a bright future.”
“We’ll continue to support them as a proud licensee for decades to come,” Huang said. “I expect Arm to be the most important CPU [central processing unit] architecture of the next decade.”
The CMA noted the termination, saying that the combined entity “would have [had] the ability and incentive to harm the competitiveness of Nvidia’s rivals by restricting access to Arm’s intellectual property.” In opening its phase II review, the EC expressed a similar concern that the merged business would have “the ability to restrict or degrade access to Arm’s technology by providers of processor products Nvidia may compete with.”
Now that the deal has been dropped, both the CMA and EC have formally canceled their investigations.
Google “Privacy Sandbox” probe closed. Google parent Alphabet (GOOG) saw the end on Friday of a year-long, high-profile CMA probe into the search engine’s plans to boost user privacy on its Chrome browser by phasing out third-party cookies that advertisers use to track consumers.
The CMA accepted a set of legally binding commitments from the U.S. tech giant that will entail deep oversight by both the CMA and the UK Information Commissioner’s Office of its proposed “Privacy Sandbox” initiative over the next six years.
During the investigation, the CMA said that it recognized the privacy objectives behind Google’s plans. But the regulator also said it wanted to ensure the changes wouldn’t harm competition in digital advertising by making online ad spending more concentrated on Google. The CMA also voiced concerns that the sandbox proposals could weaken the ability of newspapers and other online publishers to generate revenue and content.
Under the commitments, Google has agreed to be more transparent with third parties, such as news websites, over the development of the proposals and has promised not to “self-preference” its own advertising services. Google has also pledged to respect a “standstill period” of at least 60 days before it removes third-party cookies. That will give the CMA time to review competition-preserving alternatives or to decide whether further investigation into Google is necessary.
The commitments forbid Google to target digital advertising by combining user data from certain sources, irrespective of whether Google owns and operates the ad inventory. Nor may the unit share users’ Chrome browsing history with other parts of the business, which could give the company a competitive advantage over third parties.
On Friday, Google confirmed its intention to roll out the commitments globally. “We believe that they provide a roadmap for how to address both privacy and competition concerns in this evolving sector,” the company said in a blog post.
But it remains to be seen just how aligned competition authorities around the world will be with the UK-approved commitments. One CMA official recently suggested that other enforcers might disagree with the UK regulator’s conclusions. “You might see different authorities taking different issues,” Will Hayter, senior director at the CMA’s Digital Markets Unit, told an online conference in January.
German and French competition authorities declined last week to comment on that possibility.
One prominent test will be the EC’s ongoing investigation into whether Google has broken EU competition rules by favoring its own online display advertising technology services in the adtech supply chain. The Brussels-based enforcer is assessing Google’s “Privacy Sandbox” initiative, among other practices. On Friday, the EC told The Capitol Forum that it “takes note of the announcement by the CMA with respect to their Google Privacy Sandbox case.”
The European Publishers Council—whose members include Axel Springer, the Guardian newspaper, Editorial Presa Iberica and Condé Nast—said it welcomed Google’s commitments.
“The next phase of how these will be tested, commented upon and applied will be absolutely critical, especially to ensure there is no self-preferencing,” EPC Executive Director Angela Mills Wade told The Capitol Forum.
The EPC contributed to the CMA’s investigation, partly by commenting on the commitments. On Friday, the group put pressure on the EC investigation by filing a formal antitrust complaint against Google in Brussels, asserting that the company holds an “adtech stranglehold” over press publishers and other businesses. The EPC urged the commission to impose “remedies to restore conditions of effective competition in the adtech value chain.”
Google didn’t comment directly on the complaint but said publishers keep most of the revenue when they use its advertising services. “Every year we pay out billions of dollars directly to the publishing partners in our ad network,” a Google spokesperson told The Capitol Forum.
Publishers, though, have challenged this assertion, complaining that the high cost of using Google’s adtech cuts into their revenue.
Kingspan/Trimo probe finally begins in Brussels. After an almost 10-month hiatus, the EC has started the clock on its in-depth probe into Kingspan Group’s proposed acquisition of rival insulating panel manufacturer Trimo. The EC announced April 12 last year it would conduct a phase II probe into the planned merger but suspended the investigation a day later without completing a single working day of the extended investigation.
The EU watchdog finally started the clock on the review on February 4, the commission confirmed last week. The companies both produce mineral fiber sandwich panels, which are used to insulate industrial and commercial buildings, and the EC is concerned that the merger would significantly reduce competition for the product in the Czech Republic, Denmark, France, Hungary, Slovakia, Slovenia and the UK.
In opening its in-depth investigation last April, the commission said the transaction would remove an important competitive constraint. Remaining competitors would be significantly smaller than the merged entity, the EC said, in a market characterized by relatively high barriers to entry and expansion.
Mineral fiber sandwich panels probably constitute a separate market from other types of insulated panels, one characterized by limited competition, The Capitol Forum reported last July.
The commission’s phase II deadline is currently June 21. In announcing the deal in August 2020, Innova Capital, the private-equity firm that owns Trimo, had predicted that the transaction would close by the end of that year.
UK telecom regulator drops staunch opposition to network consolidation. Potential mergers involving the UK’s four mobile network operators could once again be on the table after the country’s telecom industry regulator, Ofcom, last week dropped its outright opposition to a reduction in the number of players. In a statement, the watchdog said it was “clarifying” its position on consolidation, stating that its “stance on a potential merger would be informed by the specific circumstances of that particular merger, rather than just the number of competitors.”
That assertion hardly represents an open invitation to consolidation, and any merger would still require the blessing of the CMA. But the change in stance could present an opportunity to test the regulatory waters. Vodafone (LON: VOD), for one, is reported to be eyeing mergers in response to pressure from activist investor Cevian, which has purchased a stake in the mobile group.
The EC in 2016 thwarted an attempt at consolidation in the UK when it blocked CK Hutchison Holdings’ attempt to buy Telefónica’s O2 brand in the UK. The prohibition was supported by both the CMA and Ofcom. Yet two years ago the EU’s lower-tier General Court overturned the EC’s decision, a ruling the commission has appealed to the bloc’s highest court, the Court of Justice.
The General Court’s ruling can be viewed as the first real crack in regulatory opposition to recent mobile network consolidation in large countries; a deal consolidating the Dutch market was approved by the EC in 2018. Ofcom’s statement potentially represents another opening for telecom operators that see mergers as critical to their network investment plans.
On Thursday, Vodafone confirmed it had rejected a preliminary indication of interest in its Italian unit from Iliad and Apax Partners. Vodafone said it “continues to pragmatically pursue several value accretive in-market consolidation opportunities to deliver sustainable market structures in its major European markets, including Italy.”
Yet despite some initial warm words, consolidation will likely continue to face a high regulatory hurdle for Europe’s operators.
Apple’s Dutch dating-app fines accumulate. By the end of last week, Apple (APPL) had received three fines of 5 million euros apiece ($5.7 million) from the Netherlands’ Authority for Consumers and Markets for failing to allow dating-app providers to use payment systems other than Apple’s.
The authority last year said that Apple would have to pay a weekly penalty of 5 million euros, up to a total of 50 million euros, until it complies with an order to adjust its conditions for access to the Dutch App Store for dating-app providers.
A spokesperson for the authority told The Capitol Forum that it expected Apple to comply with the order. But “we have the opportunity to impose another order subject to periodic penalty payments,” he said. “We will soon make a new statement.”
Apple didn’t immediately respond to a request for comment.
German enforcer punishes bridge-expansion cartel. Germany’s antitrust watchdog, the Bundeskartellamt, on Thursday imposed fines totaling 7.3 million euros ($8.3 million) on manufacturers Maurer and Mageba for engaging in a cartel that limited supplies and drove up prices for “modular expansion joints” used to absorb temperature-induced expansion and contraction on road bridges.
The cartel between October 2004 and January 2019 was implemented and supported “at meetings and in telephone calls between several (sales) employees of the companies,” the agency said in a statement. In setting the fines, the Bundeskartellamt said it had taken into account that the two companies had cooperated extensively during its probe. The companies didn’t respond to requests for comment.
Vestager’s Weekly Calendar
Monday. Meetings in Nigeria with Isa Ali Ibrahim Pantami, Nigerian minister of communications and digital economy, and with Tony Elemelu, president of Tony Elumelu Foundation, which fosters entrepreneurship in Africa.
Monday. Participates with Tony Elumelu in the Investment Round Table-Nigeria Jubilee Fellows Programme.
Tuesday. Meeting with Otunba Niyi Adebayo, Nigerian minister of industry, trade and investment.
Personnel News
The EC last Tuesday appointed Barbara Brandtner as director of the Markets and cases III: Financial services section of the Directorate-General for Competition (DG Comp). Brandtner, originally from Austria, has worked at the EC for more than 25 years, including 14 years handling competition cases. She is currently acting director of the unit.
Upcoming Events
February 23 at 3:30 a.m. EST (9:30 a.m. CET). OECD Competition Open Day, online conference. Speakers include Eliana Garcés Tolón, director of economic policy at Meta; Tommaso
Valletti, professor at Imperial College London and former chief economist of DG Comp; and Philip Marsden, a deputy director at the Bank of England.
March 31 at 3 a.m. EST (9:00 a.m. CET). Informa Connect’s Private Enforcement of Competition Law conference, Brussels. Speakers include Vivien Terrien from the EU’s General Court.
Recent Developments
Amazon appeals Italian fine. Amazon (AMZN) has filed an appeal before the Lazio Regional Administrative Tribunal of a 58.6-million-euro ($66.3 million) fine from the Italian Competition Authority, for AGCM, over alleged collusion with Apple to restrict which resellers of Apple and Beats products could use the Amazon.it marketplace. AGCM had originally imposed a fine of 68.7 million euros ($77.8 million) on Amazon in November, but the following month the regulator said it had found “a material error” in the penalties’ calculation.
Amazon makes EC MGM filing. Amazon last Tuesday notified its planned $8.45 billion buyout of U.S. movie studio MGM for EC merger review. The Brussels-based authority has set an initial March 15 deadline for its phase I assessment.
Among other issues, the commission is expected to assess whether Amazon might harm its distribution rivals through “input foreclosure,” which occurs when a merged entity restricts access to products or services previously supplied—in this case, MGM content.
The EC has handled several tricky input foreclosure cases of late, including the ongoing Illumina/Grail review. Microsoft’s proposed $68.7 billion takeover of Activision Blizzard is likewise expected to involve a thorough analysis of possible input foreclosure.
Microsoft and Nuance meet with CMA. CMA representatives are by now likely to have held “state of play” discussions with Microsoft (MSFT) and Nuance Communications (NUAN). CMA procedure says such discussions take place between working days 15 and 20 during the phase I procedure, and today is working day 23.
The watchdog’s guidance says that the “purpose of this discussion is to inform merger parties about any competition concerns that have been raised in the CMA’s investigation to date, including feedback from the CMA’s market test.”
The CMA has been evaluating complaints about the impact of the transaction on the UK’s National Health Service. If the watchdog has competition concerns about the proposed merger, it will invite the parties to an “issues meeting,” typically held by working day 25.
Germany approves Meta’s Kustomer purchase. Germany’s competition watchdog, the Bundeskartellamt, on Friday cleared Facebook parent Meta Platform’s (FB) $1 billion takeover of customer-service platform Kustomer. The approval follows a conditional green light from the EC on January 27.
EU court backs Polish complainant against PKP Cargo. The EU’s lower-tier General Court on Wednesday ruled against the EC, saying that in 2019 it should have reviewed, instead of rejected, an antitrust complaint from Polish company Sped-Pro concerning alleged anticompetitive behavior of PKP Cargo (WSE: PKP) on the Polish market for rail freight forwarding. Sped-Pro had argued that the EC was better placed than Poland’s competition authority to investigate PKP Cargo because of deficiencies in the rule of law in the country, including the lack of independence of the Polish enforcer and the national courts. The General Court ruled that “compliance with the requirements of the rule of law is a relevant factor which the commission must take into account.” An EC spokesperson told The Capitol Forum that it would “carefully study the judgment and reflect on possible next steps.”
