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FTC Probes Tech Giants’ Investments in AI Start-ups

By  |  January 25, 2024

In a move to scrutinize the rapidly growing influence of tech giants in the artificial intelligence (AI) sector, the Federal Trade Commission (FTC) announced on Thursday the initiation of a comprehensive inquiry into multibillion-dollar investments made by Microsoft, Amazon, and Google in the AI start-ups OpenAI and Anthropic, reported The Wall Street Journal.

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    These significant investments have allowed Microsoft, Amazon, and Google to establish strong connections with smaller AI rivals, all while avoiding intense government scrutiny. Microsoft’s substantial financial backing of OpenAI, the creator of ChatGPT, and Amazon and Google’s substantial commitments to Anthropic, another prominent AI start-up, have raised concerns about the potential impact on competition in the industry.

    Traditionally, antitrust regulators have concentrated on challenging acquisitions where tech giants acquire rivals or expand into new markets, often resulting in increased prices and potential harm to consumers. The FTC’s inquiry, however, marks a departure from this trend, focusing on how strategic investments alter the competitive landscape in the AI sector.

    According to The Wall Street Journal, the FTC will investigate the extent of influence that Microsoft, OpenAI, Amazon, Google, and Anthropic hold over each other and the decision-making processes in their partnerships. The agency has also demanded internal documents from these companies, aiming to gain insights into the deals and their potential effects on competition.

    Read more: FTC Monitoring Competition In The Artificial Intelligence Field

    Lina Khan, the Chair of the FTC, emphasized the importance of the study in understanding whether investments and partnerships pursued by dominant companies risk distorting innovation and undermining fair competition. This inquiry represents the first major effort by the agency to comprehend how partnerships and investments contribute to the expanding influence of tech giants in the AI sector.

    Ms. Khan, appointed in 2021, has been an advocate for modernizing antitrust laws to address the challenges posed by the digital age. The agency, under her leadership, filed an antitrust suit against Amazon last year, alleging the company artificially raised prices, and has consistently pushed for innovative theories on how corporations can harm the economy.

    The global regulatory landscape is also showing increased interest in tech companies’ investments in AI start-ups. The Competition and Markets Authority, a British regulator, recently announced a review of Microsoft’s deal with OpenAI to determine if it constitutes a merger that could harm competition. The European Commission is also examining whether its antitrust laws are applicable in this context.

    Source: NY Times