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Welcome to The Corner. In this issue, we explore how Nvidia is finding ways to increase its grip over the global chip market despite regulatory pushback.

Thwarted from Acquiring Arm by the FTC, Nvidia Eyes Massive Stock Investment

Austin Ahlman

The world’s newly crowned largest semiconductor company, Nvidia, is reportedly in talks to become an anchor investor in Arm’s upcoming initial public offering in the New York Stock Exchange. The move comes after U.S. and U.K. regulators blocked the corporation from acquiring Arm early last year, raising fears that Nvidia is searching for a loophole in merger enforcement policy.

UK-based Arm’s initial public offering, or IPO, comes at a time when large chip designers and manufacturers are looking to capture bigger swaths of the rapidly booming market for chips that can facilitate AI processing. Arm, which specializes in central processing unit, or CPU, designs, has emerged as a potential leader and disruptor in that sector since Nvidia’s acquisition bid was blocked. Arm’s IPO is expected to be the year’s largest.

If Nvidia follows through with plans to anchor the IPO, it will likely face fresh scrutiny from the Federal Trade Commission and the UK’s Competition and Markets Authority for potential negative impacts on the global chip market. While Nvidia has reportedly reached out to regulatory authorities to assuage concerns over the investment, its acquisitive nature and rapidly growing market power warrants higher scrutiny, lest the company use financial markets to acquire the influence and control that it sought to attain by buying Arm outright.

Arm’s recent growth is primarily related to its innovation in the design of efficient, high-powered CPUs. In the last two years, the corporation’s proprietary system-on-chip architectures have become the backbone of a new generation of Apple computers, and it has slowly gained ground in data center market share—a key area of interest for Nvidia. By enabling Apple to leave Intel’s chipsets behind, Arm has created a fresh wave of competition in a CPU marketplace that Intel had largely cornered. News that Nvidia was in talks to anchor Arm’s IPO drove the former’s already dizzying stock surge to new heights.

Nvidia has had a stranglehold on the discrete graphics processing unit, or GPU, market for years, with estimates putting their market share at upwards of 80%. Fueled by the surging use of discrete GPUs in generative AI processing, Nvidia’s market cap soared last month to north of a trillion dollars. The surge built on a solid rise in demand for Nvidia’s stock in recent years driven by the cryptocurrency industry. Discrete GPUs are also essential for mining cryptocurrency.

In a sign that Nvidia’s moves are a direct outgrowth of its thwarted takeover play, the firm has reportedly insisted on a $40 billion valuation for Arm as a condition for its investment—the same valuation Arm was given during the failed 2021 acquisition attempt. Japan’s Softbank, Arm’s current owner, has suggested that it wants a valuation that’s 50% higher.

Nvidia is not the only firm being courted as a part of the expected fall IPO. Intel is also reportedly in talks to anchor the listing. Anchor investors typically purchase at least 20% of a corporation’s shares, and sometimes up to 50%.

While the entry of a third player may appear to lessen competition concerns at first glance, such a move would raise an entirely different antitrust concern: the potential for coordination between three of the world’s most powerful chip designers. Intel has reportedly been in talks with Nvidia to begin manufacturing some of its chips, which now are primarily manufactured by the Taiwan Semiconductor Manufacturing Company, or TSMC.

According to Nicholas Rossolillo, chief investment officer at Concinnus Financial, the FTC should be more concerned about the impacts of this IPO on global chip markets than they were over Nvidia’s attempted acquisition. As a newly public entity, Arm “will have to navigate all sorts of conflicts of interest with giant corporate ‘investors’ with different agendas,” he told the Open Markets Institute.

“My worry,” Rossolillo explained, “is that a consortium of controlling interests could tie up ARM even worse than if Nvidia had been allowed to buy it outright.”

While the contours of an investment deal remain in flux, Nvidia’s recent market boom combined with Arm’s emergence as a leading disruptor in CPU markets demonstrates that the FTC was right to aggressively crack down on Nvidia’s previous entreaties.

The FTC has the authority to block investments from Nvidia (and Intel) if they end up being significant enough to trigger concerns about future anti-competitive actions. It should be prepared to use it.

Center for Journalism & Liberty Signs 10 Common Principles for Sustainable Journalism

The Open Markets Institute and the Center for Journalism & Liberty have signed onto a set of 10 common principles for supporting independent, sustainable journalism through fair compensation and by rectifying the power imbalances of the digital era. “For too long Big Tech has been able to freely use journalistic content to make their platforms more useful, attract advertisers, and now, to fuel the generative AI revolution without compensating publishers or journalists.” said Dr. Courtney Radsch, director of the Center for Journalism & Liberty. “This kind of global problem requires global solutions and that is exactly what these principles are designed to inform.”

Dr. Radsch also published an article about the Principles for Fair Compensation [[link removed]] in Tech Policy Press, writing, “The principles recognize freedom of expression as a fundamental right and prioritize public interest journalism, plurality and diversity in the news market. They ensure sustainability by guaranteeing fair compensation for publishers’ content in a range of applications and encourage transparency and accountability for any public policy mechanisms.”

Open Markets Institute Files Amicus Brief in Illumina Vs FTC in Support of Grail Divestment

The Open Markets Institute filed an amicus brief [[link removed]] in the case of Illumina v. Federal Trade Commission, urging the Fifth Circuit to deny a petition for review in the case. The Open Markets brief lays out how the FTC correctly applied the Clayton Act as Congress intended and as Supreme Court precedent demands to conclude Illumina’s acquisition of Grail is illegal. The FTC ordered Illumina to divest Grail, which makes multi-cancer early detection tests.

“The issue with Illumina, Inc.’s acquisition of Grail, Inc. is simple: a dominant firm should not be permitted to acquire another company when it controls a critical input on which the target company and its rivals depend,” the brief reads. “Instead of Grail continuing to compete in the [multi-cancer early detection (MCED) tests] market through continued innovation, the combined Illumina-Grail can compete by withholding critical inputs from rivals or supplying them on unfair terms. By impeding the growth and success of rivals in the MCED market in violation of antitrust law, Illumina may suppress beneficial innovation and rob patients of lifesaving improvements in cancer detection.” Read the full brief here [[link removed]].

📝 WHAT WE'VE BEEN UP TO: In response to news that Meta will need to obtain consent from users in Europe before delivering targeted ads, Open Markets released a statement [[link removed]] urging Facebook to require the same consent from U.S. users and users around the world. Open Markets called on U.S. lawmakers to step in should Facebook fail to take such an action. “Surveillance advertising is a threat to our democracy and to the safety of every user of today’s dominant online platforms,” said executive director Barry Lynn. “We strongly urge the company to extend these same commonsense protections to everyone.”

Dr. Courtney Radsch, director of the Center for Journalism and Liberty, released a statement [[link removed]] condemning Meta for threatening to remove access to news on Facebook and Instagram in response to a new Canadian law that would require the company to fairly compensate news publishers for the content they use and share. “In Canada, in the U.S., and around the world, consensus is growing that tech giants like Facebook, Google and others must be forced to pay for the news content they use — and from which they generate advertising dollars and value — on their platforms,” Dr. Radsch said.

OMI’s chief economist Brian Callaci [[link removed]]co-authored a working paper [[link removed]] with the IZA Institute of Labor Economics [[link removed]] entitled “The Effect of Franchise on Worker Earnings.” The paper evaluates the nationwide impact of Washington state’s enforcement of employee no-poaching clauses in franchising contracts, estimating a 4% to 6.6% increase in annual earnings for franchise workers.

Ireland’s High Court heard a case brought by OMI’s senior fellow Johnny Ryan in his capacity as fellow at Irish Council for Civil Liberties (ICCL) against the Data Protection Commission (DPC). ICCL alleges that the DPC, which supervises Big Tech’s handling of personal data in Europe, has failed to protect people against data breaches stemming from Google’s online advertising system. The case was covered in Trinity Bugle [[link removed]] and The Record [[link removed]].

Senator Cory Booker [[link removed]] quoted Open Markets Institute’s executive director Barry Lynn as a key voice in support of his signature legislation to protect farmland from corporate consolidation. “Concentrated land ownership is one of the root causes of inequality in rural communities,” Lynn said. “Restricting corporate and investor control over farmland is essential to creating a democratic, and community-controlled food system.”

Policy director Phillip Longman’s 2012 book Best Care Anywhere: Why VA Health Care Would Work Better for Everyone, was cited in DailyKos [[link removed]] in an article on socialized medicine. “The VA model of care continues to outperform the rest of the U.S. healthcare system based on key metrics, including patient safety, wait times, cost-effectiveness, avoidance of racial disparities, and adherence to evidence-based protocols of care,” wrote Longman in the book.

The American Prospect [[link removed]] editor Robert Kuttner named Barry Lynn among a group of heterdox thinkers whose ideas have come to win the day in an editorial called “Prophets with Honor.”

Yahoo Finance [[link removed]] and Techdirt [[link removed]] mentioned Open Markets Institute as one of the groups endorsing a bill proposed by senators Elizabeth Warren and Lindsey Graham to establish a Digital Consumer Protection Commission to police large tech companies.

🔊 ANTI-MONOPOLY RISING:

Surescript has settled a lawsuit brought by the Federal Trade Commission over concerns the company had monopolized the electronic prescriptions market. Under the terms of the settlement, Surescripts will be banned from exclusivity and loyalty agreements, which the FTC argues the corporation has wielded unfairly, for 20 years. ( Bloomberg [[link removed]] Law [[link removed]])

Facebook’s offer to settle a probe into its classified ads service was rejected by the European Commission. The ongoing probe, announced late last year, could lead to a mandate that Facebook change its data practices. ( Reuters [[link removed]])

The FTC is suing to block healthcare data juggernaut IQVIA from acquiring Propel Media over fears the deal could lead to a collapse of competition in programmatic healthcare advertising. ( The [[link removed]] News & Observer [[link removed]])

France’s Competition Authority sent a statement of objection to Apple for abusing its market dominance. The regulator claimed Apple allowed an easy opt-out from third-party tracking while making it more difficult to opt out from the iPhone maker’s own apps. ( Euractiv [[link removed]])

We appreciate your readership. Please consider making a contribution to support the continued publication of this newsletter.

DONATE [[link removed]] 📈 VITAL STAT: $875 Million

The amount Cooper Companies had proposed paying for Cook Medical Holdings’s reproductive health business before abandoning the deal in the wake of an FTC investigation. The FTC said the merger would have raised patient costs in reproductive health markets. ( FTC [[link removed]])

📚 WHAT WE'RE READING:

“ Selling the American People [[link removed]]”: University of North Carolina Professor Lee McGuigan traces the roots of surveillance-driven adtech to the 1950s. In his narrative-altering account of the industry, he argues the emergence of fine-tuned advertising algorithms is not a spontaneous feature of the internet era, but instead a continuation of the “ideology of optimization” that has defined American marketers’ practices for decades.

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Written and edited by: Barry Lynn, Austin Ahlman, Ezmeralda Makhamreh, and Anita Jain.

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