Comment by dcow | Hacker News Reader

Comment by dcow | Hacker News Reader

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> It's not hard to see how this deal will be bad for American consumers and businesses at large, and the FTC's purpose is to prevent that harm.

I am having a hard time understanding this. Care to explain rather than sidestepping and calling out my comment as overly simplistic? It seems the FTC is acting to protect businesses (ironically other big tech), not consumers. That’s what I don’t get.

> This action is well in line with keeping big tech from usurping the power of government.

“It’s political” isn’t really an explanation either. There’s certainly something to discuss about at what point a company becomes too big and valuable, but that doesn't seem to be the stated motivation here. And I’d be interested in understanding what the framework is for applying those restrictions and how e.g. a company like Apple slid by without getting dismantled.

EDIT: To put my confusion another way, at the end it says “The FTC acts when it has reason to believe the law has been or is being violated.” What law has allegedly been violated or would be violated should this merger succeed?

One thing the TFA says: "Because Arm’s technology is a critical input that enables competition between Nvidia and its competitors in several markets, the complaint alleges that the proposed merger would give Nvidia the ability and incentive to use its control of this technology to undermine its competitors, reducing competition and ultimately resulting in reduced product quality, reduced innovation, higher prices, and less choice, harming the millions of Americans who benefit from Arm-based products, the complaint alleges."

When a downstream firm merges with an upstream supplier that is really important to the downstream firm and its competitors, the merged firm can competitively hobble the downstream competitors. They can refuse to sell the upstream good to competitors, or raise the cost for competitors. Plus it may force the competitors (or potential new entrants) to vertically integrate themselves and enter both the downstream and upstream markets, which chills competition in the downstream market. The government also credits business justifications for the merger, and in the end they balance those with the potential harms to competition.

The article (I can't find the complaint) also says, and this is a typical vertical merger concern, that this will give Nvidia (the downstream firm) access to sensitive information of Nvidia's rivals that they had previously shared with Arm.

EDIT: There is also a general antitrust push in the Biden administration, notably in the appointments of Lina Khan and Tim Wu. Interesting to see its fruits.

Between Intel and AMD there are two competitors here. Strange that the government didn't raise a similar concern when AMD acquired ATI or anytime Intel acquired just about anything but you know how these things work and I guess Apple isn't happy with this.

Somehow reminds me of when the SEC decided that Nvidia was the next Enron back in the 00s because a few of their employees did some piddly insider trading and they spent the next two to three years trying to destroy the company. In the end, earnings were adjusted up 10 million and they got rid of their CFO as a sacrificial lamb. All these government bureaucrats need to look busy after all.

>Somehow reminds me of when the SEC decided that Nvidia was the next Enron...

There was significant insider trading occurring due to an internal email about the Xbox deal. 10 employees and 15 people total.

"The Securities and Exchange Commission has sued 15 people, including the 10 suspended nVidia employees, accusing them of insider trading in shares of the graphics chipmaker based on advance information that it would win a lucrative contract from Microsoft Corp." [1]

In a separate incident, nVidia wanted to show better quarterly results and tried to pressure their supplier to reduce costs, with the promise of paying more in the future. Their supplier wanted it in writing. The CFO knew they could not have such an explicit agreement in writing, as it would not allow them to write down the cost savings for the quarter, so they directed an employee to author two separate agreements to obfuscate their mutual nature.

"We can not sign this or have this in print. Will wipe out the credit in Q1. Need to arrange this separately and trust us to abide by it." [2]

Seems kind of in the purview of the SEC to look into these kinds of things.

1. https://money.cnn.com/2001/11/20/technology/nvidia/

2. https://www.sec.gov/litigation/admin/34-48480.htm

An inappropriate release of market influencing news that was exploited improperly by 10 employees of a 500 employee organization is your definition of significant insider trading on par with Enron? $1.7M in profits total. Those employees were terminated and they paid fines and I believe one was banned from working in tech going forward. The hyperbole here is ridiculous. That's about 1/1000th of an Enron.

But thanks for pointing out why they got rid of the CFO. I didn't know about that part. It makes more sense now.

The SEC didn't compare nVidia to Enron, the media did. That was because nVidia was the best performing S&P 500 stock for 2001, a title it took over from Enron. The unwinding of Enron's massive accounting scandal was still hot in the news at the time. It was an obvious comparison to make about another "top performer" having an accounting scandal. However, the "overreaction" by the media and market was not the fault of the SEC.

The punitive remediation for the insider traders was done due to the SEC investigating, which then lead to discovery of the accounting issue. Your characterization that the SEC had a vendetta against nVidia is completely wrong. Maybe nVidia should have had tighter controls on privileged information and better insider trading education for their employees. Maybe they also shouldn't have tried to cook their books to deceive the market. If it really was only a puny $1.7M and didn't really matter, why'd they do it? CORRECTION: $1.7M was profits by the insider traders, nVidia misstated $3.3 million in cost savings.

Ironically, Nvidia restated earnings slightly upward as opposed to Enron overreporting by $600M. Not so sure whether that was "cooking the books" or just playing fast and loose with ambiguous accounting laws which is in my experience what accountants do, but they did get caught, no argument there and the CFO was fined. But I wonder who else would get caught doing similar things of similar magnitude if their annual statements were scrutinized in as much detail here specifically looking for trouble.

As for the inside trading employees, they were fools. Good luck keeping out fools like that once you have a hundred or more employees or why do some googlers stalk their ex partner's search histories? Why do some Amazon employees snoop on Alexa recordings? Why do some Facebook employees look at the private friends list of their ex partners? Etc. There was a second insider trading investigation in 2014 that was handled quietly and efficiently unlike this fiasco. That one seemed a bit more nefarious and systematic IMO and yet no one compared it to Enron. Funny that.

https://www.marketwatch.com/story/nvidia-sec-accounting-prob...

https://www.sec.gov/news/press-release/2014-82

You just seem to want to try to come up with a bunch of excuses to downplay or redirect attention away from nVidias culpability in what they did. It was not the SEC's fault they had insider traders and their CFO knowingly and deceptively hid quarterly costs on purpose. Accountants should not actually be playing fast and loose, unless they want SEC attention.

Did 2014 involve accounting discrepancies? Did the SEC still release a public press release like they did in the 2000s? Their handling wasn't much different here. Enron was long dead by 2014 and it doesn't look like there was wrongdoing by nVidia directly, so obviously the media wouldn't make such comparisons.

Digital privacy concerns don't directly involve the SEC, though maybe the FTC. That's another topic, but one worthy of competent regulatory oversight.

So you are stating that the release of the "X is ours" email that started all this was deliberate corporate misconduct by the CEO? I don't even think the SEC insinuated that.

And that the SEC finding a small accounting discrepancy so as to justify the time they put into this investigation is actually an Enron level event?

Got it. We see things differently. You think I'm downplaying what happened. I think you're overstating it just like the media compared them to Enron.

No, it was the CFO explicitly calling out that they can't do something and then doing it anyways to deceive shareholders about quarterly costs. That should be obvious.

Just because Enron had massive fraud doesn't make $3.3 million "a small discrepancy", nor is purposefully doing something merely a discrepancy or oversight.

No one compared the insider trading to Enron. The actual accounting issue got them those comparisons.

Neither Intel nor AMD supply SoC cores in the same way that ARM does--they don't really operate in the same market segment.

NVidia's competition in the hardware acceleration space often includes ARM cores for management (e.g., the Xilinx Zynq https://www.xilinx.com/products/silicon-devices/soc/zynq-700... ), or are extension of the ARM instruction set (e.g. AWS's Graviton https://aws.amazon.com/ec2/graviton/ ).

RISC-V suppliers (e.g, SiFive) is the closest thing that ARM to has to a competitor here, and they're nowhere near the same scale.

That seems awfully esoteric to me. Compare and contrast with Intel taking Altera off the map and AMD taking Xilinx off the map. At the time, FPGAs were erroneously seen as a credible competitor to GPUs in artificial intelligence. They absolutely smash GPUs at extreme low latency, but it was a poor technological take to assume that meant they could beat them where GPUs were strong but that didn't stop lots of money being thrown at the attempt.

Which is to say it seems odd that the FTC would get its hackles up over a case as nichey as you describe. it would seem the elephant in the room is Nvidia's dominance of AI. There's nothing stopping AMD or Intel developing equivalent SoCs. In fact one of the cases you mentioned comes from Xilinx ergo AMD.

So I have to think this has to be something as basic as slinging mud at their dominance of AI. Something as simple as trying to exclude competing browsers from your operating system's desktop. Something as understandable as trying to exclude third parties from collecting money on your mobile platform. And since both other cases are larger more general instances of dominance, it's curious they aren't being investigated as well. Well not really, there's probably a lot of grift here.

But if we're going to worry about a single party having dominance of AI then we have to start asking questions about Google and Facebook controlling the major interfaces to AI. Sure, they are open source, you can fork them if you like. But they get to control all the pull requests into the master branch. That lets them control how well any one platform runs their framework. That seems a bit anti-competitive as well when at least one of the parties has their own AI hardware.

The people enforcing the laws change between administrations, so it is not unexpected that past actions look inconsistent. Biden's people were not in power then (in fact the current FTC chair was seventeen).

I'm not sure if you're saying that Intel and AMD existing means that competition is doing fine, but three actors is a highly concentrated market.

4/5 of the FTC commissioners were appointed in 2018

We seem to be OK with only two players in mobile and on the desktop for now. Interesting the battles we choose to fight.

If there’s an antitrust push, how have they not looked at Google or Amazon yet? Both businesses engage in anti-competitive behaviors in markets they dominate which possibly (likely) cross the line.

Who says they're not looking at Google or Amazon? From https://fortune.com/2020/02/11/ftc-antitrust-probe-google-fa... :

"U.S. technology giants face a new wave of scrutiny from antitrust officials, as the Federal Trade Commission demanded information about their acquisitions of startups that may have eliminated emerging competitors. The FTC issued orders to Alphabet’s Google, Apple, Facebook, Amazon.com and Microsoft for information on the terms and purposes of transactions they closed from the beginning of 2010 through 2019, the agency said Tuesday."

Here's Matt Stoller's explanation: https://mattstoller.substack.com/p/ftc-sues-to-block-nvidia-...

I'm guessing "the law" is probably the Sherman Antitrust Act, which is still on the books, though enforcement went out of fashion in the 1980s. Seems to be making a comeback, though.

I follow Matt and often agree with his takes. This short piece just seems to be a non-opinion announcement to keep his followers appraised.

> This is Lina Khan’s first major merger challenge. It is also a unanimous vote, and ironically, not all that bad for some of the key players in big tech.

I think this key point is telling… Big tech has a big hold on our political-think. And even Matt seems to have conflicting thoughts.

> enforcement went out of fashion in the 1980s

the Bell System was broken up in the 1980s

Either Sherman or Clayton Act.

From the Clayton Act:

* mergers and acquisitions where the effect may substantially lessen competition

This is my bone. I don't understand how this merger substantially lessens competition. Let's all concede the merger is obviously bad for every single business in the US and there is nothing redeemable about Nvidia and no reason to believe it should own ARM IP. They're still not competitors and no competition in the market has been lessened by such a merger. In fact, access to other people's sensitive business details probably makes things more competitive and forces participants to innovate in other areas. Only day to day contract negotiation has become shittier because now you have deal with "shitty" Nvidia. Where's the law that says companies can't vertically integrate? Is there a precedent for blocking these type of vertical mergers solely because it might be good business for the acquirer and unfortunate news for other participants? Why couldn't other participants put a bid out on ARM? Why can't Apple and Google just throw 100 billion at SoftBank and say we're buying and freeing ARM? Idk maybe I was simply born into an age of spineless non-enforcement of anti-trust, but I'm not seeing how this scenario warrants more scrutiny than "normal".

I don't understand how this merger substantially lessens competition.

Step 1: acquire ARM

Step 2: make life more difficult for other ARM license holders and/or easier for NVidia

Step 3: be the only viable supplier of ARM chips

I'm not seeing how this scenario warrants more scrutiny than "normal".

Speculating: maybe the old "normal" was too low, this was just the easiest first move, and other more difficult antitrust moves are in the pipeline.

Intel could do the exact same thing to any X86 vendor today, couldn't it? And AMD to X86_64 vendors, no? I'm not saying your logic is wrong, but this problem seems more pervasive than Nvidia and ARM. In reality if we stop this merger what we're saying is that it's a problem for any company to own IP that they license to competitors while at the same time producing and selling an in-house product that leverages the same IP. I'm not ignoring the conflicting interest here, but we've never said "a company can't be vertically integrated and also license technology to competitors". Maybe times are a changing, but if this becomes the new norm the only thing it seems to protect are incumbents in the space who are already vertically integrated...

> Intel could do the exact same thing to any X86 vendor today, couldn't it? And AMD to X86_64 vendors, no?

They already have killed off any effective competition, and that's a bad thing. If x86 was more diverse and was moving toward the current set of two, blocking it would also be good.

At least the important parts are falling out of patent...

> In reality if we stop this merger what we're saying is that it's a problem for any company to own IP that they license to competitors while at the same time producing and selling an in-house product that leverages the same IP.

Well it is. How much of a problem depends on how much competition the different parts of the market have.

I think there's a difference between a company licensing IP it has developed itself vs. acquiring another company's IP that is already being used by competitors. Not saying the latter is never allowable, but it weighs against allowing the acquisition.

Still, you raise a good point. Maybe along with blocking more mergers, we should be looking at breaking some companies up.

Take note that the FTC has not actually done anything, they have only initiated a lawsuit. A court may disagree with the FTC's assessment and permit the merger. The government loses antitrust suits. But antitrust suits are long and expensive, so a challenge like this may cause Nvidia and Arm to back off.

Your intuition is right in that vertical mergers are viewed less suspiciously than mergers between competitors. But courts still assess the impact to competition in vertical mergers. As you did, assume the worst case: if Arm is really crucial to Nvidia's competitors, and the merged firm keeps Arm's designs to themselves, competition in chip-supply is harmed. Yes, Nvidia was savvy etc. and is just doing what another actor could do, but compare this method of Nvidia beating their competitors versus the "ideal" way where Nvidia makes a better product, does it cheaper, and is generally more efficient. That's what antitrust law wants. It wants the merits of the product and the org to decide the winner in a market, not things like buying Arm and keeping them to yourself.

It looks like your question was answered in another reply to you more than a half hour before this comment of yours.

https://news.ycombinator.com/item?id=29423870

I'm by no means an attorney but the argument made seems sound.

Well if the original creator of this thread had replied in-thread to my other comment, then I wouldn't have felt the need to engage in two different spots. I agree it's annoying.

Anyway I can't help but feel the argument is pretty loose on demonstrating that Nvidia would be in a position to harm the market in a substantial way. Usually the law is enforced reactively to punish bad/unwanted behavior. We preemptively prevent mergers that would result in no real competition existing in a market, in other words: a monopoly. We do that because it's bad for consumers. You can echo the FTC's statements about how having leverage over other market participants might be harmful all you want, but the reality is that they don't explain how Nvidia owning ARM creates a monopoly (is akin to something like Intel owning ARM) and then how that is inherently bad for fundamentally bad for consumers. Nvidia owning arm looks like savvy business at best and at worst annoying and disruptive to some people who put most of their eggs in the ARM basket. I see how it could in theory have an effect on some competition to have this type of vertical integration happen, but is that substantial to the point of Nvidia being a monopoly on microprocessors and consumers left abused and holding the bag? That's quite the claim.

AMD competes with Intel and Intel is similarly vertically integrated. AMD even makes graphics cards after merging with ATI and that didn't kill any markets or harm consumers, if anything AMD graphics has become more competitive. Intel is entering the graphics card space. Personally I'd love to see another player in the processor space. Right now it's Intel and AMD and now Apple. Why wouldn't an Nvidia N2 ARM SOC that competes with the Apple M1 be a good thing? IDK I see potential consumer benefits to Nvidia being able to run with ARM. I can't help but feel like we're straining here under the guise of "big tech is big and bad let's punish them all".

Anyway probably at the end of the utility of going back an forth on wether the merger substantially lessens competition to the point of causing consumer harm. We'll see what the courts decide.

I mean, ARM is basically the only game in town when it comes to mobile chips. Combine that with nvidia's graphics technologies and now you've got basically the entire market for XR devices (I reject the use of 'metaverse' in this context) cornered.

It's one case out of many where suddenly a defacto market leader emerges with almost no room for other entrants, whereas at least without the merger device makers can source silicon from arm licensors as well as from AMD, NVDA, and INTC (soon-ish) for solid graphics components.

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