The Federal Trade Commission (FTC) has launched an inquiry into the investments and partnerships between major cloud service providers and leading artificial intelligence (AI) startups, such as OpenAI and Anthropic. The agency is concerned that these deals may undermine fair competition and innovation in the AI sector.
FTC issues orders to five companies
The FTC announced on Thursday that it issued orders to five companies under Section 6(b) of the FTC Act, which authorizes the Commission to conduct studies that allow enforcers to gain a deeper understanding of market trends and business practices. The orders were sent to Alphabet, Inc., Amazon.com, Inc., Anthropic PBC, Microsoft Corp., and OpenAI, Inc.
The agency is seeking information specifically related to:
- Information regarding a specific investment or partnership, including agreements and the strategic rationale of the investment or partnership.
- The practical implications of a specific partnership or investment, including decisions around new product releases, governance or oversight rights, and the topic of regular meetings,
- Analysis of the transactions’ competitive impact, including information related to market share, competition, competitors, markets, potential for sales growth, or expansion into product or geographic markets.
- Competition for AI inputs and resources, including the competitive dynamics regarding key products and services needed for generative AI,
- Information provided to any other government entity, including foreign government entities, in connection with any investigation, request for information, or other inquiry related to these topics.
The FTC said it will use the information to build a better internal understanding of these relationships and their impact on the competitive landscape.
FTC chair warns against tactics that foreclose competition
FTC Chair Lina M. Khan said in her opening remarks at a Thursday AI forum that the agency is scrutinizing whether these ties enable dominant firms to exert undue influence or gain privileged access in ways that could undermine fair competition.
“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,” Khan said. “Our study will shed light on whether investments and partnerships pursued by dominant companies risk distorting innovation and undermining fair competition.”
Khan also said that the FTC is interested in exploring how generative AI, which can produce novel imagery and sound, may pose new challenges for consumer protection and privacy.
Big Tech’s multibillion-dollar deals with AI startups
The FTC’s inquiry targets three separate multibillion-dollar deals that involve some of the most prominent players in the AI field:
- Microsoft and OpenAI: Microsoft has been a long-term partner and investor in OpenAI, a San Francisco-based AI research lab that created ChatGPT, a powerful text-generating system. In 2019, Microsoft announced a $1 billion investment in OpenAI to jointly build new AI technologies on Microsoft’s Azure cloud platform. In 2020, Microsoft also acquired an exclusive license to use OpenAI’s GPT-3 technology, which is considered one of the most advanced AI models in the world.
- Amazon and Anthropic: Amazon joined a $124 million funding round for Anthropic, another San Francisco-based AI startup, in December 2023. Anthropic was founded by former leaders of OpenAI, including Ilya Sutskever and Dario Amodei, and aims to create large-scale AI systems that are aligned with human values and can be easily understood and controlled. Amazon said it will collaborate with Anthropic on the research and development of AI technologies that can benefit customers and society.
- Google and Anthropic: Google also participated in Anthropic’s funding round, along with other investors such as Reid Hoffman and Peter Thiel. Google said it will work with Anthropic on advancing the state of the art in AI and exploring new applications and use cases. Google has been a leader in AI research and innovation, with products such as Google Assistant, Google Photos, and Google Translate powered by its AI capabilities.
EU and UK also scrutinizing Microsoft’s OpenAI partnership
The FTC is not the only regulator that is looking into the implications of Big Tech’s AI deals. The European Union and the United Kingdom have also signaled that they are examining Microsoft’s partnership with OpenAI, which may trigger an investigation under regulations covering mergers and acquisitions that would harm competition in the 27-nation bloc.
The EU’s executive branch said earlier this month that it has received a notification from Microsoft regarding its OpenAI investment and that it will decide by February 18 whether to launch a full-scale probe or clear the deal. The UK’s Competition and Markets Authority (CMA) also said it is considering whether to investigate the deal, which may raise competition concerns in the UK.
The EU and the UK have been stepping up their efforts to regulate the digital sector, especially the dominant platforms that have significant market power and influence over data, innovation, and consumer choice. Both jurisdictions have proposed new laws and rules to curb the anticompetitive and harmful practices of big tech and foster a fair and open digital economy.