China to investigate Nvidia in anti-monopoly case

Antitrust enforcement has been a global practice to defend fair competition and fuel innovation, leaving no room for companies to use geopolitical tensions as an excuse to break their legal commitments, top industry experts said on Tuesday.

Their comments came after the State Administration for Market Regulation, China's top market regulator, announced an investigation on Monday into US chipmaker Nvidia over suspected violations of the anti-monopoly law and commitments it made during the company's acquisition of Israeli chip designer Mellanox Technologies Ltd in 2020.

Though the specifics of the investigation remain undisclosed, Deng Feng, a professor of law from Peking University in Beijing, said that Nvidia has repeatedly stopped supplying several GPU products to China amid US semiconductor export controls, which disobeyed its commitments and has infringed upon the legitimate rights and interests of Chinese companies, sparking significant dissatisfaction within the industry.

When the US firm made the $6.9 billion bid to acquire Mellanox in 2019, concerns arose that China could block the deal due to US-China trade frictions. Beijing however later approved the deal in 2020.

Nvidia is required to refrain from engaging in practices such as tying sales or discriminating against customers when selling related products to the Chinese market. The company was also asked to ensure product interoperability and continue supplying Nvidia GPU accelerators, Mellanox high-speed networking equipment and related software and accessories to the Chinese market.

"The so-called export control is not a justified reason for Nvidia to breach its commitments or fail to fulfill its legal obligations. Even if it cannot honor prior commitments, it should adopt alternative remedies, for instance, to present new alternatives to mitigate the negative competitive effects," Deng emphasized.

Following the latest investigation, Nvidia's shares opened over 2 percent lower on Tuesday in the US stock market. In a statement, the company said that Nvidia wins on merit…and works hard to provide the best products in every region and honor its commitments everywhere they do business, and is happy to answer any questions regulators may have about its business.

Liu Xu, a senior research fellow at the National Strategy Institute at Tsinghua University in Beijing, said that enforcing antitrust efforts in high-tech sectors is a "global consensus" in recent years with the rise of digital economy.

"In fact, concerns about Nvidia's suspected monopolistic behaviors have been widespread. This year alone, antitrust authorities in the US and European Union have taken actions such as issuing opinions, and initiating investigations into whether Nvidia has abused its market dominance," he said.

China's investigation into Nvidia has been consistent with its antitrust enforcement, which has prioritized the concentration of business operators, particularly regarding large multinational mergers, Liu said, citing that since 2008, 63 merger cases have been conditionally approved, of which 60 involved multinationals.

"Fundamentally, China's review of Nvidia stems from its existing monopolistic behaviors, which already disturbed the stability of industrial and supply chains," said Zhong Gang, executive director of the Competition Law Research Institute at the East China University of Political Science and Law. "Such a move aligns with China's antitrust aims of protecting fair market competition, encouraging innovation, enhancing economic efficiency, and safeguarding consumer and public interests."

According to Nvidia's report last month, customers based in China accounted for about 13 percent of sales so far this year.

A CITIC Securities report said that the investigation serves as a legitimate management measure aimed at regulating and maintaining fair market competition, but has a guiding role for the domestic chip industry.

The move is expected to boost market sentiment around domestic computing power and chips in the short term. It also made clear that the country's current priority of encouraging the use of homegrown chips, it said.