The U.K.’s antitrust watchdog today said it will investigate Nvidia Corp.’s proposed $40 billion acquisition of British chip designer Arm Ltd.

Nvidia is the leading maker of graphics processing units for data centers and desktops. Arm, in turn, develops chip designs that underpin the processors inside most of the world’s smartphones and many other low-power devices. Arm’s chip designs are used, among others, by some semiconductor companies that compete with Nvidia.  

The antitrust investigation by the U.K.’s Competition and Market Authority will seek to determine if the deal runs the risk of harming rivals. There are three potential issues in particular that officials may evaluate. “The CMA is likely to consider whether, following the takeover, Arm has an incentive to withdraw, raise prices or reduce the quality of its IP [intellectual property] licensing services to NVIDIA’s rivals,” read the official statement about the probe.

The CMA has invited interested third parties to submit input ahead of the investigation, which is set to kick off later this year.

The probe is not entirely unexpected given that, with its $40 billion price tag, Nvidia’s proposed purchase of Arm would be one of the largest-ever acquisitions in the tech industry. The topic of potential regulatory scrutiny came up almost immediately after the transaction was announced. At the time, Nvidia pledged to “continue Arm’s open-licensing model and customer neutrality.”

The chipmaker is also planning to take other steps that could ease regulators’ concerns. Nvidia said that it intends to make the intellectual property behind its hallmark graphics card available for licensing to Arm’s customer base, which includes competing firms. A “top Nvidia executive” who spoke to Reuters added that the company plans to put safeguards in place to ensure it can’t access confidential information belonging to Arm’s customers or receive early access to its new products.

The companies previously made the argument that joining forces wouldn’t reduce competition because they operate in different markets. Nvidia’s chips are primarily found in data centers and desktops, whereas Arm designs are most commonly used to build smartphones and “internet of things” devices. However, there are some limited overlaps: Nvidia provides machine learning chips for vehicles, a segment Arm is prioritizing as well.

Buying Arm would extend Nvidia’s reach into numerous parts of the chip market where it currently doesn’t maintain a presence. The deal has certain parallels with its $6.9 billion acquisition of Mellanox, whose main target market, networking, is also an area where Nvidia didn’t have an established presence before the deal. Nvidia has built on the acquisition by introducing new chips and supercomputing products that incorporate Mellanox technology. 

Image: Nvidia