Sunday, July 21, 2024

US regulators to open antitrust inquiries

The U.S. Justice Department and the Federal Trade Commission have agreed to move forward with antitrust investigations into the dominant roles of Microsoft, OpenAI, and Nvidia in the artificial intelligence industry, according to a source familiar with the matter.

Under the agreement, the Justice Department will lead the investigation into Nvidia’s potential antitrust violations, while the FTC will focus on the actions of OpenAI and Microsoft. Despite OpenAI being a nonprofit, Microsoft has invested $13 billion in its for-profit subsidiary, aiming for a 49% stake.

The agreement was reached last week and is expected to be finalized soon, the source said.

This division of responsibilities mirrors a similar 2019 agreement between the two agencies regarding Big Tech enforcement, where the FTC took action against Meta and Amazon, and the DOJ sued Apple and Google for alleged violations. These cases are ongoing, with the companies denying any wrongdoing. The current agreement highlights increasing regulatory scrutiny over AI industry concentration.

Nvidia controls approximately 80% of the AI chip market, including custom AI processors used by cloud computing companies like Google, Microsoft, and Amazon. This market dominance allows Nvidia to maintain gross margins between 70% and 80%.

A spokesperson for Nvidia declined to comment on the agreement. OpenAI did not immediately respond to a request for comment on Thursday.

Additionally, the FTC is investigating Microsoft’s $650 million deal with AI startup Inflection AI, suspecting it might have been structured to avoid merger disclosure requirements. This deal, reached in March, permitted Microsoft to use Inflection’s models and hire most of its staff, including co-founders.

Microsoft stated on Monday that the agreement with Inflection accelerated work on Microsoft Copilot while allowing Inflection to continue operating independently. Microsoft emphasized its commitment to legal obligations and confidence in compliance.

The Wall Street Journal first reported the probe, and the New York Times reported the regulators’ agreement.

In January, the FTC ordered OpenAI, Microsoft, Alphabet, Amazon, and Anthropic to provide information on recent investments and partnerships in generative AI and cloud services. Last July, the FTC began investigating OpenAI for potential violations of consumer protection laws related to data and personal reputations.

Last week, U.S. antitrust chief Jonathan Kanter expressed concerns at an AI conference about the structures and trends in AI, highlighting that the technology’s reliance on vast amounts of data and computing power could give dominant firms a significant advantage.

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