US launches antitrust probe into Microsoft, OpenAI, and Nvidia

Amid mounting concerns over the dominance of tech giants in the AI industry, the U.S. Justice Department and the Federal Trade Commission have struck a deal to investigate Microsoft, OpenAI, and Nvidia for potential antitrust violations. With Microsoft and Nvidia commanding significant market share and capitalization, regulators aim to ensure fair competition. This move reflects growing regulatory scrutiny on AI, signalling potential repercussions for industry giants. The probe signifies a pivotal moment in the intersection of technology and regulation..Sign up for your early morning brew of the BizNews Insider to keep you up to speed with the content that matters. The newsletter will land in your inbox at 5:30am weekdays. Register here..By Jody Godoy.The U.S. Justice Department and the Federal Trade Commission have reached a deal that clears the way for potential antitrust investigations into the dominant roles that Microsoft, OpenAI and Nvidia play in the artificial intelligence industry, according to a source familiar with the matter. .___STEADY_PAYWALL___.The agreement between the two agencies shows regulatory scrutiny is gathering steam amid concerns over concentration in the industries that make up AI. Microsoft and Nvidia not only dominate their industries but are two of the world's biggest companies by market capitalization since Nvidia's market value recently surpassed $3 trillion..U.S. antitrust enforcers have publicly expressed a range of concerns around AI, from the advantage that Big Tech companies have in their access to data used to train AI models, to how generative AI affects the market for creative work, to partnerships between companies potentially being used to sidestep required merger review processes..Read more: 🔒 Nvidia unveils new AI chips and platforms to lead the next tech revolution.The move to divvy up the industry mirrors a similar agreement between the two agencies in 2019 to divide enforcement against Big Tech, which ultimately saw the FTC bring cases against Meta and Amazon, and the DOJ sue Apple and Google for alleged violations. Those cases are ongoing and the companies have denied wrongdoing..While OpenAI's parent is a nonprofit, Microsoft has invested $13 billion in a for-profit subsidiary, for what would be a 49% stake..The Justice Department will take the lead in investigating whether Nvidia violated antitrust laws, while the FTC will examine the conduct of OpenAI and Microsoft..The regulators struck the deal over the past week, and it is expected to be completed in the coming days, the person said..Nvidia has roughly 80% of the AI chip market, including the custom AI processors made by the cloud computing companies like Google, Microsoft and Amazon.com. That domination helps the company report gross margins between 70% and 80%..Spokespersons for Nvidia and OpenAI declined to comment on the regulators' agreement on Thursday. Microsoft said it takes its legal obligations to report transactions seriously and is confident it has complied with them..The agreement between the two regulators comes after the FTC in January ordered OpenAI, Microsoft, Alphabet, Amazon and Anthropic to provide information on recent investments and partnerships involving generative AI companies and cloud service providers..In July last year, the FTC opened an investigation into OpenAI on claims it had run afoul of consumer protection laws by putting personal reputations and data at risk..Last week, Justice Department antitrust chief Jonathan Kanter said at an AI conference at Stanford University that there are "structures and trends in AI that should give us pause," adding that the technology relies on massive amounts of data and computing power, which can give already dominant firms a substantial advantage..The DOJ and FTC, led by Chair Lina Khan, share jurisdiction to enforce federal competition law but avoid duplicative investigations..Bill Baer, who led antitrust efforts at the agencies during the Obama and Clinton administrations, said that typically each agency will take the lead in areas where it has amassed expertise. But occasionally the heads of the two agencies will sit down and iron out who does what, said Baer, a visiting fellow at the Brookings Institution..MICROSOFT DEAL.The FTC is also looking into Microsoft's $650 million deal with AI startup Inflection AI, over concerns as to whether the deal was a play to skirt merger disclosure requirements, the person said..The unusual deal reached in March allowed Microsoft to use Inflection's models and hire most of the startup's staff, including its co-founders..Microsoft said in a statement on Monday that the agreement with Inflection helped it accelerate work on Microsoft Copilot, while still allowing Inflection "to continue pursuing its independent business and ambition as an AI studio.".The probe was first reported by the Wall Street Journal and the regulators' agreement on AI by the New York Times. .Read also:.🔒 Microsoft's AI deal with UAE-backed G42 raises national security concerns🔒 Europe's stock pickers pivot towards AI-driven sectorsSix Tech Giants now command 30% of S&P 500 amid market shift.SOURCE: REUTERS

US launches antitrust probe into Microsoft, OpenAI, and Nvidia

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