Federal Trade Commission launches investigation into AI deals by tech giants
The Federal Trade Commission on Thursday launched an investigation into Microsoft, Amazon and Google's multibillion-dollar investments in artificial intelligence startups OpenAI and Anthropic, expanding the regulator's efforts to combine the power the tech giants may have over AI.
These deals have allowed the big companies to forge deep ties with their smaller rivals while avoiding most government scrutiny. Microsoft has invested billions of dollars in OpenAI, the maker of ChatGPT, while Amazon and Google have each committed billions of dollars to Anthropic, another leading AI startup.
Regulators have typically focused on bringing antitrust lawsuits against deals in which the tech giants directly buy up rivals or use acquisitions to expand into new businesses, leading to higher prices and other harm, and have not regularly challenged the interests that the companies buy into start-ups. The FTC's investigation will examine how these investment deals are changing the competitive landscape and could inform potential investigations by federal antitrust regulators into whether the deals violate the law.
The FTC said it would ask Microsoft, OpenAI, Amazon, Google and Anthropic to describe their influence over their partners and how they worked together to make decisions. It also said it would require them to provide any internal documents that could shed light on the deals and their potential impact on competition.
“Our investigation will shed light on whether investments and partnerships by dominant companies risk disrupting innovation and undermining fair competition,” Lina Khan, chair of the FTC, said in a statement.
The study is the agency's first major effort to understand how companies are using partnerships and investments to rapidly expand their influence in AI. Ms Khan, who was appointed in 2021, has long pushed to modernize the way the government applies antitrust law. . That included her office filing an antitrust lawsuit against Amazon last year for artificially raising prices and asking courts to embrace more new theories about how companies can harm the economy.
Other international regulators are also investigating the investments of some major tech companies in AI startups. The Competition and Markets Authority, a British regulator, said last month it was investigating whether Microsoft's deal with OpenAI was a merger within its jurisdiction and would harm competition in the economy. The European Commission also said it is investigating whether its antitrust laws could apply.
Microsoft, Amazon, Google, OpenAI and Anthropic did not immediately respond to requests for comment.
Brad Smith, the president of Microsoft, said in a social media post in December that the company had “forged a partnership with OpenAI that has fostered greater AI innovation and competition while maintaining the independence of both companies.” He said the arrangement was “very different from a takeover.”
The FTC and the Justice Department, which investigate corporate mergers and whether they could harm competition, have in recent years divided responsibility for investigating whether the tech giants violated antitrust laws. The FTC has filed antitrust lawsuits against Amazon and Meta, while the Justice Department has sued Google and is investigating Apple's conduct.
The FTC has additional powers to conduct public investigations that look at specific corporate behavior and its effect on the economy. For example, in 2021 it released a report looking at the acquisitions of tech giants. determinative that many of them were not large enough to meet the standard for mandatory government supervision. More recently the agency conducted an investigation to how social media companies and video platforms deal with misleading advertisements.
Ties between the tech giants and AI startups have come under scrutiny since November, when OpenAI's board ousted its CEO, Sam Altman. In the chaotic days that followed, Microsoft CEO Satya Nadella counseled Mr. Altman and later offered to hire him and his team directly, raising questions about the influence Microsoft had on the startup's operations. Mr. Altman eventually returned to OpenAI.
As part of Thursday's investigation, the FTC said it would ask Microsoft, Amazon, Alphabet, OpenAI and Anthropic for details, including whether the deals between the giants and the startups included rights to board seats or other oversight of each other. Microsoft was given a seat on OpenAI's board in November, but does not have the right to vote on its decisions.
Microsoft has committed $13 billion for what is effectively a 49 percent stake in the startup. The company tried to keep its stake below 50 percent because of antitrust concerns, The New York Times previously reported. Amazon said it would invest up to $4 billion in Anthropic. Google has committed to investing more than $2 billion in Anthropic.
The investigation could be followed by a more formal investigation into whether the deals between the companies violate antitrust laws. Officials at the FTC and the Justice Department have been in discussions over which agency will be allowed to investigate the Microsoft-OpenAI deal, according to a person familiar with the matter who spoke on condition of anonymity because the discussions are confidential.
An FTC spokesperson said the study was a first step in understanding a new market for technology and that the findings could be used by both agencies.
In addition, the FTC last year opened an investigation into whether ChatGPT has harmed consumers, with a broader focus on whether the technology could be used to commit fraud. (The Times has sued Microsoft and OpenAI for use of copyrighted work.)
“America's longstanding national commitment to promoting fair and open competition has been an essential part of what has made this country an economic powerhouse and a laboratory for innovation,” Ms. Khan said in a Times guest essay last year. “We are once again at an important decision point.”
Tripp Mickle And Karen Weise reporting contributed.