Microsoft, Amazon and Google face FTC inquiry over AI deals

Microsoft, Amazon and Google face FTC inquiry over AI deals

The Federal Trade Commission on Thursday launched an investigation into the billion-dollar investments made by Microsoft, Amazon and Google in artificial intelligence start-ups OpenAI and Anthropic, expanding the regulator’s efforts to rein in the power of tech giants over AI. .

These deals have allowed larger companies to form deeper relationships with their smaller rivals while avoiding most government scrutiny. Microsoft has invested billions of dollars in OpenAI, the creator of ChatGPT, while Amazon and Google have invested billions of dollars in Anthropic, another major AI start-up.

Regulators have typically focused on bringing antitrust lawsuits against deals where tech giants are buying rivals outright or using acquisitions to expand into new businesses, leading to higher prices for consumers and Others are making losses, and have not routinely challenged the stakes that companies buy initially—up. The FTC’s investigation will examine how these investment deals change the competitive landscape and could inform any investigation by federal antitrust regulators into whether the deals broke laws.

The FTC said it would ask Microsoft, OpenAI, Amazon, Google and Anthropic to describe their impact on their partners and how they work together to make decisions. The agency also said it would demand they provide any internal documents that could shed light on the deals and their potential impact on competition.

“Our study will shed light on whether investments and partnerships made by major companies risk distorting innovation and undermining fair competition,” FTC Chairwoman Lina Khan said in a statement.

The investigation is the agency’s first major effort to understand how companies are using partnerships and investments in AI to rapidly expand their impact. Ms Khan, who was appointed in 2021, has long pushed for modernizing the way the government enforces antitrust laws. This includes his agency filing an antitrust lawsuit against Amazon last year, accusing it of artificially raising prices and asking courts to adopt more novel theories about how corporations harm the economy. Can deliver.

Other regulators internationally are also investigating the investments of some big tech companies in AI start-ups. Last month, the Competition and Markets Authority, a British regulator, said it was reviewing whether Microsoft’s deal with OpenAI was a merger that falls within its scope and would harm competition in the economy. The European Commission also said it was considering whether its antitrust laws could apply.

In a statement, Microsoft’s top competition lawyer Rima Alai said the United States has “assumed a position of global AI leadership as important U.S. companies work together.” Microsoft’s partnerships with OpenAI, he said, are “fostering competition and accelerating innovation.”

Peter Schottenfels, a Google spokesman, said the company hoped the study would “shine a bright light” on companies that “have a long history of locking-in customers” and are taking the same approach when building AI tools. He said Microsoft’s cloud computing business had an exclusive license to use OpenAI’s AI models, while Google’s deal with Anthropic did not include exclusive technical rights.

Amazon and OpenAI declined to comment. Anthropic did not respond to a request for comment.

Brad Smith, President of Microsoft, said in a social media post in December The company has entered into a “partnership with OpenAI that has fostered greater AI innovation and competition while preserving independence for both companies.” He said the arrangement was “very different from a takeover.”

The FTC and the Justice Department, which investigate corporate mergers and see whether they could harm competition, have in recent years divided responsibility for investigating whether tech giants broke antitrust laws. The FTC has filed antitrust lawsuits against Amazon and Meta, while the Justice Department has sued Google and is investigating Apple’s behavior.

The FTC has additional powers to prepare public studies that look at specific corporate conduct and its impact on the economy. For example, in 2021, it released a report that looked at acquisitions by tech giants, Determination Many of them were not large enough to meet the standard of mandatory government scrutiny. Recently, the agency did an investigation Information will be provided on how social media companies and video platforms handle deceptive advertising.

Relations between tech giants and AI start-ups have faced increased scrutiny since November, when OpenAI’s board ousted its chief executive Sam Altman. In the chaotic days that followed, Satya Nadella, Microsoft’s chief executive, mentored Mr. Altman and later offered to hire him and his team directly, prompting questions about Microsoft’s influence over the start-up’s operations. Got up. Mr. Altman eventually returned to OpenAI.

As part of Thursday’s investigation, the FTC said, it will seek details from Microsoft, Amazon, Google’s parent company, Alphabet, OpenAI and Anthropic, including whether the deal between the giants and the start-up would have included board seats. or other inspection rights. each other. Microsoft gained a seat on OpenAI’s board in November, but does not have the right to vote on its decisions.

Microsoft has pledged $13 billion for effectively a 49 percent stake in the start-up. The New York Times previously reported that the company had worked to keep its stake below 50 percent due to antitrust concerns. Amazon said it would invest up to $4 billion in Anthropic. Google has committed to invest more than $2 billion in Anthropic.

The study could then lead to a more formal investigation into whether deals between the companies violate antitrust laws. FTC and Justice Department officials are discussing which agency will investigate the deal between Microsoft and OpenAI, a person familiar with the matter said on condition of anonymity because the discussions are confidential.

An FTC spokesperson said the study was a first step toward understanding a new market for the technology and that the findings could be used by any agency.

William Kovacic, the agency’s former chairman, said the study would help officials better understand the “creative technical issue” after years of criticism that the agency had been slow to handle competition problems in the economy.

“It’s a strategy to get ahead of the issue,” he said.

Separately, the FTC last year launched an investigation into whether ChatGPT harmed consumers, with a greater focus on whether the technology could be used to commit fraud. (The Times has sued Microsoft and OpenAI over its use of the copyrighted work.)

“America’s long-term national commitment to promoting fair and open competition has been an essential part of what made this country an economic powerhouse and laboratory of innovation,” Ms. Khan said in a Times guest essay last year. “We once again find ourselves at an important decision point.”

Trip Mickle Contributed reporting from San Francisco, and Karen Weiss From Seattle.

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