“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.”
The Department of Justice and the FTC are 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 AI deals. The agency has conducted similar inquiries into deceptive advertising on social media and tech giants’ acquisitions.
OpenAI, Amazon and Anthropic declined to comment. Amazon founder Jeff Bezos owns The Washington Post.
Microsoft said in a statement that such partnerships have allowed the United States to achieve global leadership in AI.
“We look forward to providing the FTC with the information it needs to complete its study,” said Rima Alaily, the corporate vice president of Microsoft’s competition and market regulation group.
Google, meanwhile, asserted that its computing services are more open than its rivals’ are. Google has previously accused Microsoft of undermining competition in cloud computing, including in filings to the FTC.
“We hope the FTC’s study will shine a bright light on companies that don’t offer the openness of Google Cloud or have a long history of locking-in customers — and who are bringing that same approach to AI services,” Google spokesman Peter Schottenfels said in a statement.
Some smaller AI companies have raised concerns about the deals and sought to differentiate themselves in the market by saying they won’t enter exclusive arrangements with tech giants. Aidan Gomez, the co-founder of the AI company Cohere, told CNBC on the sidelines of an event at Davos that the company was trying to stay independent.
“We’re not taking any massive behemoth checks from a single cloud provider that might lock us into one ecosystem, to one environment,” Gomez said.
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.”
