The US Federal Trade Commission (FTC) has initiated an inquiry into the dealings of major players, including Alphabet Inc., Amazon.com Inc., and Microsoft Corp.

The focus of the investigation is on their investments and partnerships with AI startups Anthropic and OpenAI, part of a comprehensive study on how these collaborations impact competition within the technology sector.

FTC Probes Tech Giants' $19B AI Investments

On Thursday, the antitrust and consumer protection agency announced that it had sent subpoenas to the aforementioned companies to gather crucial information. The investigation revolves around over $19 billion in investments made by Microsoft, Amazon, and Alphabet's Google, solidifying alliances between the leading cloud-services giants and premier developers of AI software.

Regulators worldwide are increasingly concerned as many promising AI startups heavily rely on established tech companies for funding and infrastructure, raising questions about potential market consolidation. During a public workshop, FTC Chair Lina Khan emphasized that the agency closely monitors the industry and cautioned AI companies against using claims of innovation as a shield for potential legal violations, asserting, "There is no AI exemption from the laws on the books."

Notably, Google, Amazon, and Anthropic declined to provide comments on the ongoing inquiry, while Microsoft and OpenAI have not responded to requests for statements.

The investigation comes at a time when major tech firms are taking a more prominent role in supporting agile AI startups, aiming to secure their positions in the flourishing AI sector. Microsoft, for instance, has revamped numerous products around AI tools powered by OpenAI's technology, while Google plans to integrate its powerful language model, Gemini, into its experimental search tool.

Microsoft's substantial investment of over $13 billion in ChatGPT maker OpenAI has sparked antitrust reviews in both the UK and the European Union. Google's commitment of $2 billion to Anthropic, and Amazon's investment of up to $4 billion, have also drawn regulatory attention. Anthropic, founded in 2021 by former OpenAI employees, has been at the center of disputes over the direction of the business.

Rebecca Kelly Slaughter, a Democrat on the FTC, criticized tech giants for structuring transactions to bypass US merger laws, expressing concern about potential market consolidation. However, she emphasized that studying the market complements, rather than substitutes, appropriate enforcement measures, as per Fortune.

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FTC Examines Microsoft's Non-Reported OpenAI Deal

Microsoft's failure to report the OpenAI transaction to the agency, citing non-control under US law and OpenAI's nonprofit status, has been reported. In the case of Google and Amazon, the deals were structured as convertible notes, delaying notification until their conversion.

The FTC is conducting the inquiry using its 6(b) authority, allowing it to issue subpoenas for market studies. Although the information is primarily collected for research, the agency can use it to open investigations or assist existing probes. The FTC has been debating internally with the Justice Department over jurisdiction on AI-related antitrust probes.

International scrutiny on digital market players and generative AI developers extends to the European Commission, which is investigating the impact of such partnerships on market dynamics. The UK's Competition and Markets Authority announced in December its intention to probe Microsoft and OpenAI's partnership.

The ongoing investigation represents the FTC's first significant effort to understand how partnerships and investments contribute to tech giants' expanding influence in AI. Lina Khan, appointed in 2021, has been a proponent of modernizing antitrust law to adapt to evolving industry dynamics.

The study will examine the influence of Microsoft, OpenAI, Amazon, Google, and Anthropic over their partners, as well as how they collaborate in decision-making. The agency will also request internal documents shedding light on potential impacts on competition.

As regulators globally focus on big tech's AI investments, the outcome of the FTC's inquiry could inform future antitrust investigations, as officials seek to strike a balance between fostering innovation and preventing anti-competitive practices, according to The New York Times.

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