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US DOJ & FTC to Investigate Antitrust Concerns in AI Dominated by Microsoft, OpenAI, and Nvidia
The US Justice Department and FTC have agreed to investigate potential antitrust violations by Microsoft, OpenAI, and Nvidia in the AI industry. Concerns over concentration in the AI sector and the dominance of these companies have prompted regulatory scrutiny. Microsoft and Nvidia are among the world's largest companies by market capitalisation, with Nvidia recently surpassing a market value of $3 trillion.
This move comes as regulatory scrutiny intensifies over concerns of concentration in the AI sector. Microsoft and Nvidia not only dominate their respective industries but are also among the world's largest companies by market capitalisation, with Nvidia recently surpassing a market value of $3 trillion.
US antitrust enforcers have expressed various concerns regarding AI, including the advantage that Big Tech companies have in accessing data used to train AI models, the impact of generative AI on the market for creative work, and the potential misuse of partnerships to bypass merger review processes.
This agreement between the two agencies mirrors a similar arrangement made in 2019 to divide enforcement against Big Tech, which resulted in the FTC bringing cases against Meta and Amazon, while the DOJ sued Apple and Google for alleged violations. These cases are still ongoing, and the companies involved have denied any wrongdoing.
While OpenAI's parent company is a nonprofit, Microsoft has invested $13 billion in a for-profit subsidiary, giving it a 49% stake. The Justice Department will lead the investigation into whether Nvidia violated antitrust laws, while the FTC will examine the conduct of OpenAI and Microsoft. The regulators have finalised the deal over the past week, and its completion is expected in the coming days.
Nvidia currently holds approximately 80% of the AI chip market, including custom AI processors used by major cloud computing companies like Google, Microsoft, and Amazon. This dominance allows Nvidia to report gross margins between 70% and 80%.
Representatives for Nvidia and OpenAI declined to comment on the regulators' agreement, while Microsoft stated that it takes its legal obligations seriously and is confident in its compliance.
This agreement follows the FTC's order in January for OpenAI, Microsoft, Alphabet, Amazon, and Anthropic to provide information on recent investments and partnerships involving generative AI companies and cloud service providers. Additionally, the FTC initiated an investigation into OpenAI last year on allegations of violating consumer protection laws by compromising personal reputations and data.
During an AI conference at Stanford University, Justice Department antitrust chief Jonathan Kanter expressed concerns about the structures and trends in AI that could give already dominant firms a significant advantage due to the reliance on massive amounts of data and computing power.
The DOJ and FTC, under the leadership of Chair Lina Khan, share jurisdiction in enforcing federal competition law to avoid duplicative investigations. Bill Baer, a former antitrust leader at the agencies, explained that each agency typically takes the lead in areas where it has expertise, but occasionally the heads of both agencies collaborate to determine their respective roles.
Microsoft's $650 million deal with AI startup Inflection AI is also under scrutiny by the FTC, as there are concerns that the deal was an attempt to evade merger disclosure requirements.
The investigation into these matters was first reported by the Wall Street Journal, while the New York Times covered the regulators' agreement on AI.
The US Justice Department and FTC have agreed to investigate potential antitrust violations by Microsoft, OpenAI, and Nvidia in the AI industry.
Concerns over concentration in the AI sector and the dominance of these companies have prompted regulatory scrutiny.
Microsoft and Nvidia are among the world's largest companies by market capitalisation, with Nvidia recently surpassing a market value of $3 trillion.
Source: REUTERS