Investigation into French Graphics Card Company Leads to Raid

European regulators continue to take action against Big Tech companies in their efforts to prevent them from stifling competition, with the most recent incident being a raid on the offices of technology firm Nvidia, as reported by the media.

The French Competition Authority (FCA) said on Wednesday that it conducted a morning raid a day earlier on a company in the “graphics card sector”. The French newspaper Challenges and the Wall Street Journal identified the company as Nvidia.

Nvidia and FCA declined to comment.

WHY IS NVIDIA IMPORTANT?

Nvidia makes graphics processing units (GPUs), chips that break a computing task into smaller pieces and process them together, making it faster than traditional methods.

Tech companies, video game console manufacturers, and even bitcoin miners are highly seeking GPUs for their data centers to solve complex math puzzles and earn more cryptocurrency.

Nvidia has a near monopoly in the GPU market with 84 percent market share, leagues ahead of rivals Intel and AMD. With a market capitalization of $1 trillion, Nvidia is becoming crucial to the rapidly developing AI technology.

Almost all computer systems used to power services such as ChatGPT – OpenAI’s state-of-the-art generative AI chatbot – use Nvidia GPUs.

GPU prices start at over $1,000, but the ones favored by AI companies can cost well over $10,000. Nvidia’s specialized AI systems, such as the DGX A100, start at $199,000, or the price of four Tesla Model 3s.

For example, Oracle said it spent billions of dollars on Nvidia chips.

WHY IS FRANCE INTERESTED?

Earlier this year, the Finnish Competition Authority published a report on the competitive functioning of the cloud service sector.

It looked at the market position of cloud companies such as Amazon, Google and Microsoft and whether their dominant market position affects competition.

In the report, the authority also emphasized that several trends, such as large language models and cloud gaming, might affect the competitive activities of the industry.

Nvidia is present in both sectors and if any startup is planning to start an AI business, they have to depend on Nvidia for chips.

The Finnish Competition Authority made an unannounced visit and seizure of the premises with the judge’s permission. Whether the company carried out anti-competitive practices can only be determined by examining the facts.

“In terms of the next steps after the initial raid, there is likely to be legal action against the raid itself and the order of the judge authorizing the raid,” said Charlotte Colin-Dubuisson, antitrust and foreign investment partner at law firm Linklaters.

In France, this is a separate proceeding and could have an impact on the FCA’s case if the raid and/or order is overturned, Colin-Dubuisson said.

IS THE FCA INVESTIGATING OTHERS?

Several French authorities have scrutinized Big Tech companies in the past, including fining Google in 2021 for violating EU competition law.

The Finnish Competition Authority is investigating whether competitors of large cloud companies have obstacles.

The authority has tools to protect competition under the Act on Abuse of Dominant Positions, the Cartel Act, the Abuse of Economic Dependence and the Control of Concentrations, and the Act on Restrictive Practices.

It also believes that some market failures could likely be remedied by regulations currently under discussion, such as the proposed EU data law.