The Italian Competition Authority referred to the Commission Nvidia-Run :ai acquisition. Illumina/Grail, the US election and some considerations
Introduction
The European Commission is assessing the acquisition of Israeli startup Run:ai by the US tech giant Nvidia upon referral from the Italian Competition Authority (Autorita Garante della Concorrenza e del Mercato, AGCM) under Art. 22(1) EUMR. This case is of special interest as it raises questions of both a legal and a policy nature. Legally, the referral follows the landmark Illumina/Grail judgment(C-611/22P) by the European Court of Justice, which limited the power of the national competition authorities (NCAs), to refer to the Commission’s concentrations that were not notifiable according to the EUMR. The case’s outcome, on the policy side will reveal how the EU intends, through its competition laws, to regulate the emerging AI industry, especially in relation to US companies. The US Department of Justice is currently investigating the same acquisition, but the new Trump Administration could shift its focus on antitrust enforcement to not let the EU take advantage of the companies. The present contribution will discuss both sides and provide a general outline of the current M&A strategies deployed by companies in the AI market.
The Referral from Italy to the Commission: the call-in power of the Italian Competition Authority
Nvidia is the main global supplier of graphics processing units (GPUs) for data centre applications, while Run:ai supplies ‘GPU orchestration software’, used to manage AI computing infrastructure. The two companies have worked together since 2020. The Nvidia Run:ai acquisition did not meet the thresholds for turnover set forth in Art. The operation was not notified to the Commission because it did not meet the thresholds set out in Art. The acquisition did not meet the notification thresholds based on the national turnover set by Italian competition law. 16(1) Law of 10th Oct 1990, No. 287). The AGCM also has the power to “call in” the notification of concentrations below the threshold, under certain conditions set out by Art. 16(1-bis). 16(1-bis)
. 16(1) is met or the global turnover of the involved undertakings is above 5 billion euro; and (iii) the AGCM ‘recognises the existence of concrete competitive risks in the national market or in a relevant part of it, based on the information in its possession, and taking into account the detrimental effects on the development and spread of small innovative enterprises’.In February 2024, the AGCM adopted a communication
on the enforcement of the call-in power under Art. 16(1-bis). The Authority clarified the provision can apply to the acquisition of a company with limited or no turnover by a large multinational, after considering certain parameters such as ‘the relevance of their innovative activities’. The AGCM has also outlined the criteria it uses to assess concrete competitive risks, even when turnover does not indicate current or future market power. For example, if the acquired company is a startup with significant potential, but is not yet generating significant revenues, or if they are an “important innovator” or conducting “potentially significant research”. The Authority states that these risks can affect the Italian Market even if the involved enterprises do not generate any turnover in Italy. For example, if Italian users or consumers use digital services without compensation, their R&D could be relevant for the Italian market, or if there is another significant connection to the Italian market. The scope of the AGCM’s call-in powers is broad and can include operations that are performed in other jurisdictions. The Authority will request notification and the undertakings involved have 30 days to respond. Otherwise, they may be fined. The case is then assessed at national level or referred under Art. 22 EUMR.
Activating Art. Illumina/Grail: 22 EUMR
The AGCM’s referral allows the Commission to examine a transaction that would otherwise be outside the scope of EUMR. The Nvidia Run:ai acquisition does not meet the EU dimension requirement as per Art. The AGCM and the Commission both considered that the acquisition of Nvidia-Run:ai did not meet the EU dimension requirement under Art. The Commission accepted the referral, and asked Nvidia to notify. This triggered the standstill obligations on the undertakings. Pending the outcome of the procedure, its start is already an interesting development, as we will see how the Commission and the National Competition Authorities can adapt to the Illumina/Grail judgement.National authorities with broad call-in powers may extend sensibly the capacity of the Commission to scrutinise transactions outside the EUMR scope. Margrethe Vestager, the former Competition Commissioner, commented on the judgment.
She noted that since the Illumina/Grail referred, Member States have already provided new powers which would allow the Commission continue to receive referrals under Art. In accordance with the ruling, 22 EUMR is in compliance. The Commission’s ability to scrutinise acquisitions of innovative startups by large companies that fall below thresholds is key. The regulator could examine the Nvidia and Run:ai acquisition from two opposite perspectives. Run:ai allows its clients to optimize their computing power and reduce the need for AI infrastructure and hardware. Is Nvidia consolidating its market share by absorbing a useful technology that makes its products more attractive? Or does it want to ‘kill’ this technology so that companies will need more of its AI hardware?Alan Riley explored the impact of Illumina/Grail in an article published in this blog. The AGCM’s referral confirms that the Commission will continue to rely on NCA referrals. Riley does, however, highlight the limitations of this “status quo” scenario. If each NCA is given different call-in power, this could create a fragmented and unpredictable scenario. Not only expensive for the undertakings but also for the enforcers as companies may proactively inform multiple NCAs of their transactions in order to avoid potential fines or divestiture orders. Riley concludes his article by recommending the adoption of an NCA network notification and outlines how Article 22(1) EUMR can be applied to killer acquisitions. This would provide predictability and transparency, in line with the parameters established by the Court in Illumina/Grail. It will be interesting which NCA joins the AGCM. Nvidia is also under scrutiny on the other side of the Atlantic. Nvidia’s power is also being scrutinized on the other side. This strategic shift led the DoJ to challenge more mergers than in previous periods. This phase was accompanied with the amendment of Merger Guidelines
as well as the modification of the notification requirements under Hart-Scott-Rodino Act. The increased scrutiny didn’t spare the AI sector. Along with Nvidia, all US tech giants were affected by antitrust regulations. For example, Microsoft was scrutinised when it ‘acqui-hired’ Inflection
through the recruitment of certain key figures, or had to relinquish its observer seat on OpenAI’s board to address concerns about the acquisition of confidential information.
Going back to Nvidia, the DoJ is currently performing two investigations, one regarding the company’s business practices and other regarding the acquisition of Run:ai. Bloomberg reported that DoJ inquiries escalated into the issue of subpoenas. The DoJ could be determining if the company is making it more difficult for buyers to use AI semiconductors from its competitors by tying them or imposing exclusive purchasing obligations. According to some estimates Nvidia controls up to 90% of AI chips. The concerns are shared, as mentioned above, by European authorities. In July 2024 the DoJ, FTC, European Commission, and UK Competition and Markets Authority issued a joint statement
highlighting the competition and consumer risks in the AI industry. Yet, this common purpose between the two sides of the Atlantic will probably end with the inauguration of the new Trump Administration, whose return to the White House was backed by part of the Silicon Valley. You reap what you sow: the symbiotic relationship between big tech and startups Big tech and startups would indeed prefer to be benignly neglected by regulators. In recent years, the AI ecosystem saw the emergence of a mutually beneficial relationship between both groups, particularly in relation to the semiconductor sector
. One sector drives growth and development in the other. This relationship has led to major tech firms adopting two primary strategies in order to benefit from the growing AI market, while balancing market risks and investment. The first strategy involves direct investments in AI startups. This creates preferential partnerships which offer opportunities for acquisitions once these startups have reached maturity. In 2023, major technology companies will have contributed two-thirds to the $27 billion raised in 2023 by emerging AI companies
. In many cases they will buy the startup directly after a few short years. To avoid this, a second investment strategy
, more’silent’, has also been used: complex licensing deals that allow them to extract top talent (‘acqui-hires”) and technologies without triggering regulatory scrutiny. To circumvent this, a second investment strategy, more ‘silent’, has been also used: complex licensing deals that allow them to extract top talent (‘acqui-hire’) and technologies without triggering regulatory scrutiny.Nvidia has been quite proactive in this regard, given that the popularisation of AI drove its stock value up by 237% in 2024. The company has a dedicated venture-capital arm called NVentures that, along with its corporate development team has built a portfolio for investments in many AI startups such as AI21Labs. Runway. Cohere. Inflection. Adept. and Mistral. Nvidia’s acquisition of Run:ai is a reflection of these two strategies. The investigations by EU and US authorities could discourage investors and startup founders who often want to be acquired by large companies. Regulators may also impede the innovation strategies of big tech. In 2021, FTC prevented Nvidia from acquiring Arm, a chip-designing startup. The many challenges of competition regulation in the AI industry
Conclusion – the many challenges that competition enforcement faces in the AI sector
The race for emerging technologies to capture opportunities is shaping the AI marketplace. The AI market is being shaped by the race to capture the opportunities presented by emerging technologies. These sectors play a major role in the economy. These sectors are also a priority for the EU, as demonstrated by the Draghi report or legislative initiatives such as the AI Act or Chips Act. They present challenges in terms of competition, industry and geoeconomics. The Commission may have found a way, through the NCAs call-in power, to scrutinise killer purchases that is compatible with Illumina-Grail’s judgement, but it may not be the best solution. The question remains, however, as to whether or not competition enforcement can actually encourage innovation on the AI market. The next few years will determine if transatlantic cooperation can keep up in the fields of antitrust and technology governance.
