Nvidia facing EU investigation over unfair business practices in promoting AI products

Nvidia has a near-monopolistic stronghold on the AI chip market, holding about 84% of the total market share. The company’s valuation has grown exponentially since demand for generative AI peaked, and the world scrambles to deal with accelerated computing going mainstream — innovations that depend on Nvidia’s chips.

However, the US chipmaker’s success has also led to increased regulatory scrutiny from regulators in the European Union, the United States, the UK, China, and South Korea.

Nvidia’s chip market monopoly under scrutiny 

Recently, the European Commission sent out questionnaires that probed the existence of any commercial and technical links between Nvidia’s graphics processing unit (GPU) products. The EU competition enforcer is focusing on how Nvidia sells its GPU products to various customers and whether the contracts require them to buy networking equipment with GPU. 

Nvidia said: “We support customer choice and compete on merit across the board. Our products are best-in-class and able to stand on their own. We support open industry standards, enabling our partners and customers to use our products in a wide variety of configurations and system designs.”

The watchdog is known to put out such questionnaires as part of fact-finding procedures, especially when it needs to substantiate initial concerns. If it finds Nvidia guilty of EU antitrust violations, the US chipmaker may face fines of up to 10% of its global annual turnover.

Large corporations often face antitrust scrutiny 

Aside from Nvidia, other companies worldwide are under scrutiny because of the monopoly they seem to enjoy. Good examples are tech giants Apple and Meta. Both companies are currently involved in high-profile cases alleging unfair competition and antitrust, with some of them even having legal issues outside the United States. 

For example, in Apple’s DOJ antitrust case, the U.S. Department of Justice accused Apple of monopolizing the smartphone market. They allege the company limits cross-platform compatibility, restricts third-party app functionalities, and enforces the 30% “Apple Tax” for App Store transactions. 

The DOJ claims the listed practices hinder competition and pressure users to continue as patrons in Apple’s ecosystem. The case has similar elements to historical antitrust cases like U.S. v. Microsoft. 

The European Commission is also involved in legal proceedings against Apple for apparently not complying with the EU Digital Markets Act (DMA). The commission claims the company has been restricting alternative payment systems, blocking third-party app stores, and favoring its own services. The regulator believes these practices stifle competition in the European market. 

According to the Federal Trade Commission (FTC), Meta, formerly Facebook, enjoys a monopoly in social networking by acquiring potential competitors, such as Instagram and WhatsApp. As far as the lawsuit is concerned, the acquisitions got rid of any competition and limited consumer choice. 

More than 80 Spanish media companies also sued Meta on grounds of unfair competition in digital advertising. In their allegations, they stated that Meta used its dominant position to undermine competition in advertising markets between 2018 and 2023. A trial is now set for 2025. 

Even in free markets, regulators tend to step in when one company grows to suspicious levels within its industry. Nvidia has stepped into territories similar to Google, Meta, and Apple. 

If any of these companies are implicated in the lawsuits or investigations against them, there could be significant repercussions for their businesses and the industry they operate in. Not only can they face fines, there could be mandatory changes to their operations, including but not limited to forced sales, IP sharing, and regulation to prevent a future recurrence.

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