FTC launches probe of Big Tech’s AI investments

Agency says it will look into how roles of Microsoft, OpenAI, Amazon.com, Anthropic and Alphabet affect competition in red-hot field

The US Federal Trade Commission has a unique authority that allows it to conduct broad studies of competition in different industries.

WASHINGTON — The Federal Trade Commission said it would investigate the growing arms race among the biggest technology companies to produce and commercialise artificial intelligence.

The agency said on Thursday it had issued orders seeking information about AI investments to Microsoft, OpenAI, Amazon.com, Anthropic and Google-owner Alphabet. OpenAI is the developer of ChatGPT, the AI chatbot that was released in November 2022 and now has versions tailored for business applications.

The FTC under Chair Lina Khan has expressed concern about whether dominant technology firms would quickly command the growing field of generative AI, systems that have humanlike abilities to converse, create media, write computer code and more.

The FTC, which shares antitrust authority with the Justice Department, said it would use its study to probe the companies’ investments and partnerships and how they affect the competitive landscape for AI. The FTC has a unique authority that allows it to conduct broad studies of competition in different industries, which sometimes take years to produce outcomes.

“Our study will shed light on whether investments and partnerships pursued by dominant companies risk distorting innovation and undermining fair competition,” Ms Khan said.

The FTC’s staff has been negotiating with Justice Department officials for a few months over how they would divide the work of reviewing major AI investments and acquisitions. Companies are generally required to seek approval for proposed transactions valued at over $US119m ($180m). Either the FTC or DOJ reviews the deal for its impact on competition and any possible violations of antitrust law.

It wasn’t immediately clear whether the FTC’s new investigation would affect that inter-agency process. That process is ongoing, people familiar with the matter said.

Ms Khan said early last year that companies with big investments in cloud computing could find ways to muscle smaller rivals out of the AI business, since the models generally require huge amounts of data and computing power.

“We need to be very vigilant to make sure that this is not just another site for the big companies becoming bigger and really squelching rivals,” she said in March 2023.

Microsoft has invested $US13bn in OpenAI since 2019 in exchange for the right to 49 per cent of future profits. OpenAI says Microsoft holds a “minority economic interest” in an OpenAI for-profit entity.

Some FTC officials were concerned that the agency wasn’t told about the investment in advance. Last year, officials began an informal look into whether that transaction model could be used to avoid early antitrust review of AI investments.

Google and Amazon are major investors in Anthropic, a rival of OpenAI that was founded by former OpenAI engineers in 2021.

The companies have 45 days to respond to the FTC’s orders.

Google said in a statement that its investments preserve room for AI companies to work with competitors and that it doesn’t have exclusive rights to use Anthropic’s technology. “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,” a Google spokesman said.

The FTC’s review seeks background on the “strategic rationale” of different AI investments, decisions about new products, governance rights and the companies’ own analysis of competition in the AI market.

Some of the questions it disclosed on Thursday resemble ones it asks during an investigation of a proposed merger, including asking for “information related to market share, competition, competitors, markets, potential for sales growth, or expansion into product or geographic markets.”

Wall Street Journal