- Added information about the FTC investigation
Update, January 25, 2024:
The Federal Trade Commission (FTC) has launched an investigation into investments and partnerships between large cloud providers and AI startups. The orders were sent to companies involved in three separate billion-dollar investments: Microsoft and OpenAI, Amazon and Anthropic, and Google and Anthropic.
The FTC’s goal is to understand these relationships and their impact on the competitive landscape, and to determine whether the investments and partnerships distort innovation and undermine fair competition.
In particular, the FTC’s investigation seeks information about the strategic rationale, practical effects, and competitive impact of the investments and partnerships.
This includes information about market share, competition, competitors, markets, potential for sales growth, and expansion into product or geographic markets.
The agency is also interested in competition for “AI inputs and resources,” as well as any information provided to other government agencies, including foreign governments, on these topics.
Article published on January 20, 2024:
The US Department of Justice (DOJ) and the Federal Trade Commission (FTC) are currently discussing which agency should lead the antitrust investigation into the partnership between OpenAI and Microsoft.
The talks concern possible anticompetitive effects of the partnership, particularly in the market for large language models such as ChatGPT. Before the government can formally intervene, the question of jurisdiction must be resolved.
The FTC has been looking into the partnership since at least early December, although there has been no formal investigation to date. Microsoft reportedly did not register the deal with the FTC because OpenAI is a non-profit organization and therefore not subject to the US merger law.
Regulators are concerned about the benefits both companies could gain from working together. Both the DOJ and the FTC are especially eyeing Microsoft’s involvement in the reinstatement of OpenAI CEO Sam Altman after he was fired last year.
Microsoft’s interference in OpenAI’s management of this situation was a key factor in the EU Commission’s decision to open an investigation. The UK’s Competition and Markets Authority is also investigating antitrust issues related to the partnership.
Nadella downplays importance of OpenAI for Microsoft
Microsoft CEO Satya Nadella emphasized in an interview at the World Economic Forum in Davos that he is not seeking further control over OpenAI. Microsoft is currently the largest investor in OpenAI, with a 49 percent stake, and has invested a total of about $13 billion in the startup.
Despite the close relationship between Microsoft and OpenAI, Nadella emphasized that Microsoft is not dependent on OpenAI. Microsoft provides key technology components, such as the computing infrastructure for OpenAI, and conducts extensive research in the field of AI itself.
Still, Microsoft currently relies heavily on OpenAI to keep up with competitors like Google when it comes to language models. All of Microsoft’s major AI products, such as Copilot, are based on OpenAI technology.
The FTC is also investigating AI companies for possible unlawful use of data for AI training and privacy. OpenAI’s ChatGPT is also on the FTC’s checklist for spreading misinformation about individuals.