Tech Companies Under FTC Spotlight for AI Startup Investments

The Federal Trade Commission (FTC) is looking into the high-value investments made by tech companies Microsoft, Amazon, and Google in artificial intelligence (AI) startups OpenAI and Anthropic. This move aims to understand better how these ties can significantly impact AI power distribution.

These partnerships have been beneficial for both the investing tech giants and the startups. The large-scale companies get to extend their influence in the AI arena, while the startups secure significant financial support. Microsoft’s investment in OpenAI has reached billions of dollars. Likewise, Amazon and Google have each poured billions into Anthropic.

Traditionally, regulators focus on deals where significant corporations acquire smaller rivals or use such acquisitions to expand into new industries. In these cases, there is a potential threat to fair competition and a risk of price increases impacting consumers. However, these startups’ investment deals have largely evaded government attention — until now.

The FTC wants to discover whether these investments manipulate the competitive landscape and if they breach any laws. The commission has asked Microsoft, OpenAI, Amazon, Google, and Anthropic to provide clear details of their influence on their partner companies. The objective is to evaluate how these partners join forces in decision-making and gather internal documents to gain insights into the partnerships’ effects on competition.

The FTC is also keen to understand how dominant companies might exploit such partnerships and investments to accelerate their grip on AI. This initiative aligns with the FTC chair, Lina Khan’s, ongoing efforts to adapt the application of antitrust law to modern circumstances. She was a key player in filing an antitrust lawsuit against Amazon last year, asserting that the corporation artificially inflated prices.

Overseas, regulators are also scrutinizing these tech giants’ investments in AI startups. For instance, the British regulator Competition and Markets Authority is evaluating whether Microsoft’s deal with OpenAI harms competition.

Strategic alliances between tech giants and AI startups have been under increased scrutiny since November when OpenAI’s board dismissed its CEO, Sam Altman. Suspicion arose about Microsoft’s influence over OpenAI’s operations, leading to further questions.

As a part of the inquiry, the FTC is seeking information on whether the deals between the tech giants and the startups involve rights to board seats or mutual oversight. For instance, Microsoft secured a seat on OpenAI’s board last November but doesn’t have voting rights.

Microsoft has affirmed a $13 billion investment in OpenAI for a 49% stake in the startup. Amazon has committed up to $4 billion to Anthropic, while Google pledged to invest over $2 billion.

This FTC study could potentially set the stage for a more formal investigation into whether these partnerships breach antitrust laws, giving us a comprehensive understanding of this emerging tech market.