The US Department of Justice and the Federal Trade Commission (FTC) have reportedly reached an agreement on how they will conduct an antitrust investigation into tech giants Microsoft, Nvidia and Open AI.
All companies are important players in generative AI: OpenAI is the nonprofit startup behind ChatGPT, the successful AI-powered chatbot. Microsoft, the world's largest company by market capitalization, has invested more than $13 billion in OpenAI and owns a 49 percent stake in the company's for-profit subsidiary.
Chipmaker Nvidia is a world leader in graphics processing units (GPUs), a key piece of hardware needed in AI. The company recently reached a valuation of $3 trillion, surpassing Apple to become the second-largest company in the world.
US authorities are likely to want to determine whether tech giants used anti-competitive means to dominate the booming artificial intelligence industry.
Under the terms of the agreement, which was reported by several US media outlets, the FTC will investigate Microsoft and Open AI, while the Department of Justice will investigate Nvidia.
What is the United States government going to investigate?
U.S. regulators – as well as non-government observers – are concerned about the dominance of a handful of companies over the industry and whether it will outperform smaller competitors and startups with unfair business practices.
The US government has previously investigated Google's monopoly on search engines and Meta's dominance over social media in light of its ownership of Facebook, Instagram and WhatsApp.
The cases are part of a major policy shift in the United States over the past five years toward favoring greater regulation after years and years of more pro-market attitudes, according to Dirk Auer, director of competition policy at the International Center for Law and Economics in Portland, Oregon.
“Authorities in both the United States and the European Union are very interested in bringing cases in the generative AI space. In their view, this is the next big thing, and they think, rightly or wrongly, that they failed to make competition cases in the early years of Web 2.0 and that this led to greater concentration in less competitive markets of what would have occurred otherwise. the case,” Auer told Al Jazeera.
Why are investigations divided between two government agencies?
Both the FTC and DOJ are responsible for enforcing federal antitrust laws.
The DOJ is a criminal law enforcement agency, while the FTC is a civil law enforcement agency, but their work can overlap. Before launching an antitrust investigation, the two agencies must notify each other since they share responsibilities.
The two agencies worked together on a landmark case in 2019 against Facebook, Amazon, Apple and Google parent company Alphabet, which resulted in each of the tech companies being sued for allegedly violating antitrust laws.
Experts say an investigation against Microsoft, Nvidia and OpenAI could take a similar approach.
Why are they taking action now?
US antitrust lawyer Barry Bennett said both law enforcement agencies could be acting before the statute of limitations expires or trying to advance their investigations well before the US presidential election in November.
There may also be a “nascent sense that Congress lacks cohesion and will to enact legislation that provides a regulatory alternative to litigation against companies that dominate the AI ecosystem,” Bennett told Al Jazeera.
In this climate, the FTC and DOJ have already been busy this year. The Justice Department filed an antitrust lawsuit in March against Apple for monopolizing the US smartphone market, while the FTC is also separately investigating a $650 million deal between Microsoft and Inflection, another intelligence startup. artificial.
Were these companies expecting an investigation?
Neither Microsoft, OpenAI nor Nvidia should be surprised when federal investigators come knocking.
In January, the FTC launched an investigation into investments made by Microsoft, Amazon, and Alphabet (Google's parent company) in OpenAI and Anthropic, another generative AI company.
At the time, FTC Chair Lina M. Khan said the agency hopes to “shed light on whether investments and partnerships made by dominant companies risk distorting innovation and undermining fair competition.”
What could a lawsuit achieve?
The goal of an investigation would be to make the tech industry more competitive, something regulators are credited with achieving in the past, according to Bennett.
The US government dissolved telecommunications giant AT&T in 1984, and in 2001 won a landmark case against Microsoft over its monopoly on web browsers for the Windows operating system.
Bennett said these two cases “unlocked enormous creative potential and greatly improved innovation in the technology sector.”
Auer said, however, that he was unsure whether a case against Nvidia, Microsoft and Open AI would hold up in court.
“There are two basic problems with these AI cases. The first is that right now the generative AI space seems very, very competitive and that doesn't make it an ideal target for antitrust intervention,” Auer said.
“The second big issue is that these deals with big tech companies appear to be extremely valuable to generative AI startups,” Auer said, adding that more regulation would also mean that funding and investment deals would take longer to receive approval, which would slow down further research and innovation.
