French Competition Authority Raids Nvidia Offices to Check Big Tech's Dominance

JAKARTA - The French competition authority (FCA) reported on Wednesday, September 27 that they had carried out an early raid at a company on "graphics cards" the day before. Although the name of the targeted company was not disclosed in the official report, French newspapers Challenges and the Wall Street Journal identified it as Nvidia. While Nvidia and FCA declined to comment on the report.

Nvidia is known for producing graphics processing units (GPUs), chips that break down computer tasks into small parts and process them together, making them faster compared to traditional methods.

These GPUs are highly sought after by technology companies for their data centers, by video game console manufacturers, and even by bitcoin miners to solve complex mathematical puzzles and earn more cryptocurrency.

Nvidia has a near monopoly on the GPU market with 84% market share, far ahead of competitors Intel  and AMD. With a market valuation of around 1 trillion US dollars (IDR 15.3 quadraliaun), Nvidia has also become very important in rapidly developing artificial intelligence (AI) technology.

Almost all of the computing systems used to power services like ChatGPT - OpenAI's famous generative AI chatbot - use GPUs from Nvidia.

While GPU prices start at just over 1,000 US dollars (IDR 15.3 million), those favored by AI companies can cost well over 10,000 (IDR 153 million). Custom AI systems from Nvidia like the DGX A100 start at $199,000 (IDR 3 billion), or the price of four Tesla Model 3s. Oracle, for example, says it has spent billions of dollars on Nvidia chips.

Earlier this year, the FCA issued a report on the competitive functioning of the cloud computing sector. They examined the market dominance of cloud computing companies such as Amazon, Google, and Microsoft and whether their market dominance affected competition.

In the report, the authority also highlighted several developments, such as large language models and cloud gaming, that have the potential to impact the competitive functioning of the sector.

Nvidia has a presence in both sectors, and if any startup plans to create an AI company, they will need to rely on Nvidia for their chips.

The FCA carried out an unexpected visit and seizure at the premises after permission from the judge at the court. Whether the company implemented anti-competitive practices can only be determined through a fact-based investigation, it explained.

"In terms of next steps after the initial raid, there will likely be litigation over the raid itself and the judge's order authorizing the raid," said Charlotte Colin-Dubuisson, antitrust and foreign investment partner at law firm Linklaters, as quoted by Reuters.

In France, this is a separate proceeding before the courts, and could impact the FCA's case if the raid and/or its order is declared void, Colin-Dubuisson said.

Various French authorities have scrutinized Big Tech companies before, including fining Google in 2021 for violating EU competition law. The FCA is examining whether competitors of large cloud computing companies are facing any headwinds.

These authorities have tools to protect competition based on laws on abuse of dominant position, cartel laws, abuse of economic dependence, and concentration controls, as well as laws on restrictive competitive practices.

Reuters reported that they also think that some market failures will likely be addressed through regulations under discussion, such as the proposed EU Data Bill.