Published on Jan 18, 2022
Nvidia defends Arm deal. Nvidia’s (NVDA) response to the UK Competition and Markets Authority’s (CMA) in-depth probe of the company’s planned acquisition of British chip designer Arm Holdings articulates a defense that’s well within the mainstream of European antitrust law. Yet such is the global regulatory antipathy toward the $40 billion takeover that the prospects of the deal’s approval remain slim.
The Nvidia response, lodged with the CMA on December 20, became public when the UK watchdog published it last week. In the 28-page paper, Nvidia said the CMA’s view of the takeover target is “a mirage” in which the agency saw Arm as an “entity that ignores its profit motive and has no competition.”
The CMA doesn’t account “in every relevant market” for competition from Intel, the world’s dominant supplier of central processing unit chips for over 30 years, Nvidia said.
“No industry observer can seriously contend that Intel, AMD, and Arm’s other competitors are so incapable that they cannot even compete with Arm,” the submission said.
Arm’s current owner – SoftBank – had, in fact, approached Nvidia about the possibility of a takeover because “Nvidia would be uniquely suited to help Arm create new IP and develop a world-class ecosystem” that could compete with the x86 architecture developed by Intel, according to the response.
Even if Nvidia hampered its competitors by withholding Arm’s IP, such a move would immediately reduce Arm’s revenue, damaging the buyer’s investment, according to the response. “No economically rational, publicly traded entity would embrace such a self-defeating strategy,” the document said.
Nvidia further took aim at the alternative path that deal opponents have suggested for Arm – that the company pursue an IPO instead – stating that as a standalone company Arm would face “scale, scope, and economic limitations.”
The paper stands in stark contrast to an FTC complaint filed December 6 that argued the deal would give Nvidia the power and incentive to put their rivals at a disadvantage by manipulating Arm’s pricing, the terms and timing of access to the target’s IP, and Arm’s developments and features.
The U.S. agency paints a picture of the deal as one that would allow Nvidia to foreclose its rivals from access to critical inputs in a host of markets. Arm-based chips have become a “de facto industry standard” for CPU technology “contained in billions of computer chips worldwide.”
EU competition chief Margrethe Vestager shares the views of her UK and US counterparts. Announcing the European Commission’s own in-depth probe into the transaction last October, Vestager said Arm IP is “an important input in products competing with those of Nvidia, for example in datacentres, automotive and in Internet of Things.” She added that the commission’s analysis shows the transaction “could lead to restricted or degraded access to Arm’s IP, with distortive effects in many markets where semiconductors are used.”
The EC on December 11 resumed its phase II probe of the deal following a one-and-a-half month suspension, and has set a May 25 decision deadline. The CMA has a May 2 deadline to submit its report to Nadine Dorries, secretary of state for digital, culture, media and sport, the final decision maker on the case.
A spokesperson for Nvidia said the company in its response stressed how the deal “will help accelerate Arm, and boost competition and innovation, including in the UK.” Still, the company is mindful of the CMA’s position and is “working to address the regulators’ concerns in Phase 2,” the spokesperson said.
China’s State Administration for Market Regulation (SAMR), meanwhile, has yet to begin its formal review of the deal – possibly anticipating that authorities in Europe or the U.S. will block the merger. That means if Nvidia confounds expectations and succeeds in overturning FTC, EC and CMA objections to the deal, SAMR could still thwart the deal.
Publishing group reacts to Google offer. Google (GOOGL) is unlikely to escape the German competition authority’s intervention in its news aggregation business despite the tech giant offering a remedy to ease the agency’s antitrust concerns, a key critic of the company told The Capitol Forum.
Last week, the Bundeskartellamt said it will meet with publishers to see if Google’s offer is adequate.
“Even if the consultation concludes that the changes go far enough, there is still strong oversight of the approach to press publishers’ rights,” said Corint Media in an emailed statement.
A complaint by Corint Media, which represents media companies’ publishing rights, spurred the Bundeskartellamt in June to launch an investigation into Google News Showcase, a service launched in 2020 that allows publishers to present their content in a more comprehensive fashion.
At the core of Showcase are story panels, which are boxes that contain titles, photos and other condensed news content.
The German agency is examining whether Google’s initial plan to integrate Showcase into its general search function would lead to the company favoring its own services in the search results.
The tech giant told the Bundeskartellamt it no longer plans to include Showcase content in general search results and otherwise won’t abuse its dominant position to the detriment of publishers, the agency said last week. The company also has pledged to keep Showcase contracts with the publishers separate from ongoing talks on other ancillary copyright payments Google makes to the publishers.
However, even if the publishers endorse Google’s remedy, the agency will remain focused on the company.
In last week’s announcement, Bundeskartellamt President Andreas Mundt said the agency also is “closely monitoring” Google’s negotiations with publishers on the ancillary copyright fees.
EC blocks South Korean shipbuilding merger. The EC on Thursday prohibited Hyundai Heavy Industries Holdings’ attempt to buy rival Daewoo Shipbuilding & Marine Engineering — its first formal block since June 2019 when the regulator prevented the creation of a joint venture by Tata Steel and ThyssenKrupp.
Announcing the shipbuilding prohibition, the commission said the merged South Korean entity would have enjoyed a dominant position in the worldwide market for the construction of large liquefied natural gas (LNG) carriers.
The EC said the companies had been increasing their market presence over the past 10 years and that the merged company would have a share of at least 60%. Only one large competitor would remain, but the rival’s capacity wouldn’t have been sufficient to act as a credible constraint, the EC said. The commission also found high entry barriers and that demand for large LNG carriers wasn’t affected by the Covid-19 pandemic.
While the commission’s recent practice has been to suspend highly problematic transactions and wait for the companies themselves to abandon the deals, Hyundai Heavy Industries forced the EC into making a formal decision. The in-depth review had been on hold in Brussels for well over a year from July 2020 but restarted again in November after the companies submitted information required by the EC.
End-game talks on EU’s DMA kick off. European governments, lawmakers and the EC, in their first round of joint talks last week, set out their positions on the EU’s Digital Markets Act, which
aims to prevent anticompetitive behavior by digital gatekeepers such as Amazon (AMZN), Google and Meta’s Facebook (FB). The Europeans are trying to overcome their differences to thrash out the bill’s final text.
One of the main differences between governments and parliamentarians is the legislation’s scope. The European Parliament wants to extend the rules contained in the act to include web browsers, virtual assistants and connected TV. After the inaugural meeting, EU competition chief Vestager praised negotiators’ commitment to small businesses and consumers. Future talks will delve into the technical aspects of the legislation and the inevitable political compromises the negotiators will have to make. Negotiators aim to finish the talks by the end of March.
UK class action against Google. Lawyers for Google and UK consumer advocate Liz Coll clashed yesterday in a preliminary hearing at the UK Competition Appeal Tribunal (CAT) over how a class action case that 19.5 million Android users brought against the company is funded. The tribunal’s judges will need to know that the claimants can fund their own costs before allowing the case to proceed.
Coll has applied to represent the users, who allege that Google violated the country’s competition laws. Specifically, Coll and the users said that the company illegally bundled its Google Play app store with other key apps; restricted app developers’ ability to distribute Android apps via channels other than Google Play; prevented developers from using alternative processing providers to Google’s payment system; and charged the developers an “excessive and unfair commission” for purchases.
During yesterday’s hearing, Google pressed Coll to disclose redacted information about the way the litigation is funded, including details about an insurance policy that’s part of the claimants’ funding arrangement. But Coll’s lawyer countered that the insurance premium amounts included in the redacted information reveal the insurer’s and lawyers’ confidential views about the litigation’s risks and shouldn’t be disclosed.
A tribunal hearing later this year will decide the validity of the case under the UK’s new class action regime.
The CAT also will review the merits of a similar suit against Apple at a three-day hearing starting May 3. Class representative Rachael Kent is seeking the green light to represent around 19.6 million iOS users in the UK who made a purchase using the system starting in October 2015.
Antitrust claim against Meta. Facebook parent Meta is facing a potential payout of 2.3 billion pounds in damages related to a UK class action suit for allegedly abusing its market dominance by imposing unfair terms and conditions on users and exploiting their personal information between 2015 and 2019. Competition law expert Liza Lovdahl Gormsen is representing more than 44 million British Facebook users before the CAT.
A Meta spokesperson said contrary to what the complainants allege, Facebook offers excellent value to its users.
“People access our services for free. They choose our services because we deliver value for them and they have meaningful control of what information they share on Meta’s platforms and who with,” the spokesperson said. “We have invested heavily to create tools that allow them to do so.”
More Apple payment options for Dutch. Apple is allowing Dutch dating apps in its App Store to provide additional payment processing options for users, responding to last month’s demands from the country’s competition authority. App developers can choose to include an in-app link to their websites so customers can complete their purchase or use a third-party payment system within the app.
But on Friday, Apple in a statement stressed that it disagrees with the enforcer’s orders and has appealed them. The company had until Saturday to adjust its payment policy for dating apps after the Netherlands Authority for Consumers and Markets told it to adjust the “unreasonable conditions” in its App Store. The agency said yesterday it would assess whether Apple now meets its requirements in part by consulting with app developers.
Illumina faces Grail remedy deadline. Illumina has until midnight Friday to offer the EC formal concessions in connection with the gene sequencing company’s purchase of cancer screening test developer Grail. A remedy offer would push the commission phase II deadline to March 18 from February 25.
CMA consults on S&P’s remedies. The CMA today said it’s seeking third-party feedback by February 1 on remedies offered by S&P Global regarding the company’s purchase of IHS Markit. The UK authority said it could make modifications to the undertakings after receiving the comments. The CMA said it “currently considers NewsCorp to be a suitable purchaser” of the assets S&P has offered to divest to secure UK merger approval.
Vestager’s Weekly Calendar
· Wednesday. Participates in the European Parliament’s plenary debate on the draft Digital Services Act in Strasbourg, France
· Wednesday. Holds a call with Ausrine Armonaite, Lithuania’s minister of the economy and innovation
· Friday. Meets with Ane Halsboe-Jørgensen, Denmark’s minister for culture, in Copenhagen
· Friday. Participates in the Citizens’ Dialogue organized by Danish magazine “Raeson” in Copenhagen
· Friday. Receives the 2021 Unicef Children’s resolution on rights on the Internet in Copenhagen
Personnel News
New French competition chief. French lawmakers on Wednesday green lighted Benoît Cœuré’s candidacy to head the national competition agency, Autorité de la Concurrence. Coeuré, an economist who served on the Executive Board of the European Central Bank, will replace former chief Isabelle de Silva.
Upcoming Events
January 19-20 at 9:30 a.m. EST (3:30 p.m. CET). Concurrences’ Cartels Workshop: “An advanced seminar on substantive and procedural EU developments.” Speakers include Maria Jaspers, director of the Directorate-General for Competition’s cartel unit; Dirk Van Erps, adviser to DG Comp’s deputy director-general for antitrust and cartels; senior UK and Spanish competition authority officials; and legal secretaries of the EU Court of Justice.
February 8 at 6:30 a.m. EST (12:30 p.m. CET). ABA Antitrust Law Section’s 2022 Antitrust Global Seminar Series’ Brussels conference.
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 (09:00 a.m CET). Informa Connect’s Private Enforcement of Competition Law conference, Brussels. Speakers include Vivien Terrien from the EU’s lower-tier General Court.
Recent Developments
NortonLifeLock seeks German clearance for Avast merger. NortonLifeLock has filed its proposed acquisition of Czech antivirus software maker Avast for merger approval in Germany, the national watchdog confirmed last week. The Bundeskartellamt has until February 7 to complete its phase I review.
Greiner’s Recticel offer lapses as EC review put on hold. Technical foam producer and supplier Greiner has decided against waiving EC phase I merger approval as a condition to its voluntary public takeover offer for rival Recticel, resulting in the deal’s expiration. Nevertheless, Greiner said last week it will continue to work constructively with the Brussels-based authority on its ongoing in-depth probe. The commission suspended the phase II review on December 16 after the would-be buyer didn’t answer the agency’s information request. Following the public offer’s expiration, Greiner CEO Axel Kühner said the company will “explore options for the stake in Recticel to maximize the value of our investment.”
Veolia’s missing information holds up UK probe. The CMA last week said Veolia, in addition to Suez, had failed to provide documents and information to the authority about the combination of the French waste and water management rivals. The UK watchdog’s in-depth probe of the transaction will remain on hold until both companies supply the missing information. The CMA had set a June 6 deadline for its review, but that date will be pushed back by the same number of days as the probe is on hold.
Meta files Kustomer deal for German approval. Facebook parent Meta last week filed its planned takeover of CRM software specialist Kustomer with Germany’s competition watchdog for merger approval. The Bundeskartellamt last month ordered Meta to notify the transaction for German scrutiny. The deal also is undergoing an in-depth probe at the EC, though the Brussels-based regulator will reportedly clear the merger subject to conditions.
Germany blocks surface draining merger. German merger officials last Thursday blocked ACO Ahlmann’s plan to buy rival drainage company BIRCO. The companies are active in draining sewage system surface water from roads, public squares, and private and commercial properties. The Bundeskartellamt said the merged entity would account for almost half of the market turnover.
