US prepares for antitrust clash with AI heavyweights Nvidia, OpenAI, Microsoft

The biggest antitrust regulators in the US are stepping up their scrutiny of the nation’s most powerful developers of artificial intelligence.

The Justice Department and the Federal Trade Commission have launched and divided up investigations of Nvidia (NVDA), Microsoft (MSFT) and OpenAI, according to reporting from the New York Times and Wall Street Journal.

The DOJ will lead a probe of Nvidia’s (NVDA) dominance in the market for microprocessors that power AI, according to the Times. The FTC would lead antitrust investigations into Microsoft and OpenAI.

WASHINGTON, DC - OCTOBER 4:  (L-R) Federal Trade Commission Chair Lina Khan and Assistant Attorney General for Antitrust Jonathan Kanter participate in a discussion on antitrust reforms at the Brookings Institution October 4, 2023 in Washington, DC. Khan assumed the role of FTC chair in June 2021 after being appointed by U.S. President Joe Biden and confirmed by the Senate. (Photo by Drew Angerer/Getty Images)

Federal Trade Commission Chair Lina Khan, left, and assistant attorney general for antitrust Jonathan Kanter participate in a discussion on antitrust reforms last October in Washington, DC. (Photo by Drew Angerer/Getty Images) (Drew Angerer via Getty Images)

The new scrutiny is part of a wide-ranging effort by the Biden administration to rein in what it views as anticompetitive behavior across a number of industries, from healthcare to groceries to tech.

The administration has already alleged anticompetitive conduct against tech giants Apple (AAPL) and Amazon (AMZN), and claimed that Microsoft’s acquisition of gaming giant Activision Blizzard would create a gaming market monopoly.

It also took to trial a case filed by the Trump administration over Alphabet’s (GOOG, GOOGL) dominance in search. A judge is currently weighing the evidence in that case, with a decision expected this year.

The efforts have not always been successful. The FTC failed in its challenge against Microsoft’s acquisition of Activision Blizzard and fell short in a separate battle to prevent Meta (META) from being able to purchase VR company Within.

The FTC made it clear last year that it wanted to look a lot closer at the burgeoning field of AI.

It said last July that it had started a consumer protection-based investigation into OpenAI’s data collection practices, and potential harms caused by the output of its large language models (LLMs).

Then in January, it began a broader inquiry into deals between Big Tech and AI developers, including Microsoft’s $13 billion investment in OpenAI, and Alphabet’s relationship with rival AI developer Anthropic.

The Wall Street Journal reported that the FTC’s probe of Microsoft will extend beyond an examination of the tech giant’s conduct to include a deal it reached with AI developer Inflection AI.

According to the Journal, the FTC wants to know why Microsoft chose to pay Inflection a $650 million licensing fee to resell Inflection’s technology, rather than buy it. The regulator’s interest was piqued, according to the report, because Microsoft also acquired most of Inflection’s staff as part of the accord.

In response to the report, Microsoft’s spokesperson said the agreements with Inflection gave it an opportunity to recruit Inflection AI staff and accelerate development of its AI chat interface Microsoft Copilot.

That structure, Microsoft said, enables Inflection to continue pursuing its independent business and ambition as an AI studio.

“We take our legal obligations to report transactions under the HSR Act seriously and are confident that we have complied with those obligations,” the spokesperson said.

Both companies received subpoenas from the FTC asking for information tied to the deal, the Journal reported.

Nvidia declined to comment on the reports.

Michael Carrier, an antitrust expert and co-director of Rutgers Institute for Information Policy and Law, said antitrust regulators looking to test the Microsoft agreement against antitrust laws will look to the substance and not the structure of the deal.

“The agency will try to determine whether Microsoft restructured this deal in a way that gave it control of InflectionAI while avoiding FTC review of the transaction,” Carrier said.

Alexis Keenan is a legal reporter for Yahoo Finance. Follow Alexis on Twitter @alexiskweed.

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