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The EC is launching an ‘in-depth’ antitrust probe into the proposed deal.

The European Commission announced this week that it has opened an in-depth investigation into Nvidia’s proposed $40 billion acquisition of U.K.-based chip technology vendor Arm.

The European Union regulator said it is concerned about the implications of the deal. They fear that the merged entity would have the ability and incentive to restrict access by NVIDIA’s rivals to Arm’s technology. They also believe that the proposed transaction could lead to higher prices, less choice and reduced innovation in the semiconductor industry.

The merger would give Nvidia the theoretical capability to restrict access to Arm processor technology. Indeed, billions of smartphones around the world rely on that technology.

The deal is dangerous because “semiconductors are everywhere”

Executive Vice-President Margrethe Vestager, responsible for competition policy, said: “Semiconductors are everywhere in products and devices that we use everyday as well as in infrastructure such as datacentres. Whilst Arm and NVIDIA do not directly compete, Arm’s IP is an important input in products competing with those of NVIDIA,” she added. As examples, Vestager mentioned datacentres, automotive and in Internet of Things.

Vestager explained that the acquisition of Arm by NVIDIA “could lead to restricted or degraded access to Arm’s IP. This, she claimed, could have “distortive effects in many markets where semiconductors are used.”

“Our investigation aims to ensure that companies active in Europe continue having effective access to the technology that is necessary to produce state-of-the-art semiconductor products at competitive prices,” she said.

The Commission’s probe will look into the potential for the deal to reduce competition for chips designed for data centers, autos, video game consoles and computers.

It will also examine the potential of Nvidia refocusing Arm’s research and development on products that are the most profitable for Nvidia – at the cost of Arm’s technology that others rely on.