U.S. antitrust enforcers have initiated an investigation into the relationships between leading artificial intelligence (AI) startups and tech giants, including OpenAI and Anthropic, and the potential implications on fair competition.
Lina Khan, Chair of the U.S. Federal Trade Commission (FTC), announced the probe during an AI forum, expressing concerns about the influence and privileged access these ties might grant dominant firms. The inquiry focuses on investments and partnerships between AI developers and major cloud service providers.
Compulsory orders issued to tech giants and AI startups
The FTC has issued “compulsory orders” to five companies as part of its investigation. These companies include cloud computing giants Amazon, Google, and Microsoft and AI startups Anthropic and OpenAI. The orders compel these entities to provide information concerning their investments and partnerships, shedding light on the nature and extent of their relationships.
Microsoft’s extensive and long-standing association with OpenAI is among the most notable partnerships. The tech giant made its first billion-dollar investment in OpenAI in 2019 to provide essential computing power for training AI models. In return, Microsoft secured exclusive rights to much of OpenAI’s technology, which was subsequently integrated into various Microsoft products.
In response to inquiries about the investment, Microsoft CEO Satya Nadella emphasized the mutually beneficial nature of the partnership, comparing it to other commercial collaborations, such as the one with chipmaker Intel. Nadella stated that Microsoft provides the computational resources needed for AI training, which OpenAI then leverages to develop its technology. This synergy, he argued, ultimately enhances their competitiveness in the market.
Amazon, Google, and Microsoft have also recently entered into multibillion-dollar deals with Anthropic, an AI startup founded by former leaders of OpenAI. These arrangements have raised further concerns about the consolidation of market power within the AI industry.
Global scrutiny beyond U.S. borders
The European Union (EU) and the United Kingdom (UK) have expressed interest in scrutinizing the Microsoft-OpenAI partnership. The EU’s executive branch announced its intention to assess whether the partnership might trigger an investigation under regulations pertaining to mergers and acquisitions, potentially affecting competition within the EU’s 27-nation bloc. Similarly, the UK’s antitrust watchdog initiated a review in December.
OpenAI, in particular, has faced scrutiny due to its governance structure and relationship with Microsoft. The startup began as a nonprofit research institute dedicated to the safe development of advanced AI.
Despite its nonprofit status, most of its staff now operates under a for-profit subsidiary formed later. The sudden firing and subsequent reinstatement of CEO Sam Altman, along with a tumultuous period marked by behind-the-scenes negotiations and potential employee departures, raised questions about the company’s stability.
Microsoft’s involvement in OpenAI led to the tech giant gaining a nonvoting board seat, although Nadella has emphasized that Microsoft does not exercise control over OpenAI’s decisions. The complications surrounding Altman’s temporary removal stemmed partly from the startup’s unique governance structure, which has evolved.
FTC’s ongoing focus on AI
The FTC’s investigation into the ties between tech giants and AI startups aligns with its year-long effort to monitor and address illegal practices in the AI industry. In April, Chair Lina Khan emphasized the government’s commitment to cracking down on harmful business practices related to AI, including using AI-generated content for fraudulent activities.
Moreover, Khan has stressed the importance of preventing the consolidation of market power among a select few AI leaders, warning against potential anticompetitive tactics used to solidify dominance. The FTC’s investigation reflects this broader concern regarding the future landscape of the AI industry.
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