Federal Trade Commission Scrutinizes Big Tech’s AI Deals

The Washington Post

14:34 JST, January 26, 2024

The Federal Trade Commission announced an inquiry Thursday into tech giants’ multibillion-dollar investments in leading artificial intelligence companies, amid mounting concerns that the AI revolution is only deepening the power of a handful of companies that have long dominated the internet economy.

The agency sent demands to OpenAI and Microsoft, after the latter made multiple investments in the maker of ChatGPT, including a deal to exclusively provide cloud computing to power OpenAI’s research and products. The FTC is also reviewing deals Amazon and Google struck with Anthropic, a public-benefit corporation dedicated to creating responsible AI.

“History shows that new technologies can create new markets and healthy competition. As companies race to develop and monetize AI, we must guard against tactics that foreclose this opportunity,” FTC Chair Lina M. Khan in a news release. “Our study will shed light on whether investments and partnerships pursued by dominant companies risk distorting innovation and undermining fair competition.”

Microsoft, OpenAI, Google, Amazon and Anthropic did not immediately respond to requests for comment. Amazon founder Jeff Bezos owns The Washington Post.

The Department of Justice and the FTC are currently discussing which agency can review the Microsoft and OpenAI deal, according to a person familiar with the deliberations, who spoke on the condition of anonymity to discuss the clearance process. The results of this study could inform any investigation the DOJ or the FTC decides to open into the partnership.

Under the Biden administration, federal regulators have stepped up their scrutiny of Big Tech companies’ acquisitions of smaller rivals, bringing lengthy and costly legal challenges against Meta’s acquisition of the virtual reality company Within and Microsoft’s purchase of the game maker Activision. In the age of generative AI, Silicon Valley giants have to date sidestepped such legal obstacles by instead funneling investments into younger AI companies and striking deals to ensure those start-ups are giving preference to their computing services.

The FTC’s study will analyze the competitive impact of the deals, delving into whether they’re hurting companies’ competitors or preventing expansion into new markets. The inquiry will probably take several months, but its findings could inform future government challenges to A.I. deals. The agency has conducted similar inquiries into deceptive advertising on social media and tech giants’ acquisitions.

The FTC already has opened an investigation into whether OpenAI is running afoul of consumer protection laws, as The Washington Post first reported in July.

Already, the relationship between Microsoft and OpenAI has caught the attention of global competition regulators. The British competition enforcer said in December that it was probing the partnership between the companies, and its counterpart in the European Union is reviewing whether the deal might be subject to the bloc’s competition laws. Regulators are increasingly scrutinizing the deal after Microsoft gained a nonvoting board seat following CEO Sam Altman’s dramatic return to the company after a brief ouster.

At an event last week at the World Economic Forum, Microsoft CEO Satya Nadella defended their partnership, saying “the facts speak for themselves.” He noted that the companies have two different governance structures and boards.

“I hope everyone would agree that companies should be allowed to partner and invest in each other,” Altman said. “I’m sure Satya wishes sometimes he could tell us what to do.”