The United States Department of Justice and the Federal Trade Commission (FTC) will be responsible for investigating three of the largest technology companies involved in the development of artificial intelligence.
On Wednesday, June 5th, The New York Times first reported on the federal government’s investigation into NVIDIA, Microsoft, and OpenAI. Politico had reported back in January that the FTC and DOJ were negotiating on who would investigate Microsoft and OpenAI.
Three sources familiar with the matter told Politico that the DOJ and FTC are close to reaching an agreement to investigate potential anticompetitive behavior among the biggest players in the artificial intelligence industry.
As part of the agreement, the DOJ is preparing to investigate NVIDIA and its leading position in providing high-end semiconductors that support artificial intelligence computations, while the FTC will focus on whether Microsoft and its partner OpenAI have unfair advantages in rapidly advancing technologies, especially in the field of large language models.
These three companies have been leaders in the artificial intelligence field, with NVIDIA’s AI technology now valued at $3 trillion, second only to Microsoft.
The negotiations for this deal have been ongoing for nearly a year. While the leaders of both institutions have expressed a strong desire to ensure that rapidly advancing AI technologies are not monopolized by existing tech giants, their ability to conduct investigations is limited until the agreement is finalized.
The agreement is yet to be finalized, but it could potentially be completed as early as this week.
Additionally, as part of the agreement, the FTC will retain regulatory authority over Amazon, while the DOJ will retain oversight of Google. Although both companies have faced antitrust lawsuits, investigations into their AI-related activities have been put on hold pending the agreement.
These two institutions jointly oversee antitrust enforcement in the US and must communicate with each other before commencing any investigations. This process is typically formalized and then proceeds based on industry boundaries, but in the tech market, those boundaries have become blurred.
Over the past 18 months, FTC Chair Lina Khan and DOJ antitrust head Jonathan Kanter have both emphasized the need to ensure that the rapidly developing field of AI is not controlled by a few companies, similar to what they believe has happened in social media, online advertising, e-commerce, search, and other high-tech products over the past 15 years.
Currently, the FTC is conducting research on the cloud computing market and AI investments by Microsoft, Amazon, and Google. Last week, the DOJ held a one-day competition and AI seminar at Stanford University. The FTC recently held a similar AI seminar.
The investigation raises issues related to the so-called AI stack, which includes high-performance semiconductors, large-scale cloud computing resources, data for training large language models, software for integrating these components, and consumer-facing applications like ChatGPT.
One of the most prominent jurisdictional divisions between the two institutions took place in 2019 when then-FTC Chair Joseph Simons and DOJ Antitrust Chief Makan Delrahim agreed to allow the FTC to investigate Meta (formerly Facebook) and Amazon for antitrust violations, while the DOJ would handle investigations into Google and Apple. According to sources, this agreement was also reached after about a year of negotiations.
Since then, all four companies have faced antitrust litigations, with cases against Google progressing the fastest. Following a 10-week trial last fall, a federal judge in Washington is now deliberating on whether Google illegally monopolized the search market.
In reality, AI has been around in various forms for years, including in the form of Siri on iPhones. But by the end of 2022, with the introduction of generative AI, such as OpenAI’s ChatGPT, AI began to capture public attention. These products simulate human-like text, art, video generation, and answering questions in amazing ways.
In recent years, Microsoft has invested billions in OpenAI, utilizing Microsoft’s vast computing resources to develop technology. The software giant is integrating OpenAI’s services into its core businesses, including the Bing search engine. Regulators worldwide are concerned that this investment structure aims to avoid legal scrutiny of mergers and gives both companies an unfair advantage in competition.
In recent years, as NVIDIA chips traditionally used for computer graphics processing have been repurposed for heavy AI computing tasks, NVIDIA’s profits have seen explosive growth. The company is estimated to hold up to a 90% share in the high-end AI chip market, which is often difficult to access. Reports indicate that the French antitrust regulator has begun investigating NVIDIA.
According to industry insiders, NVIDIA’s sales strategy has drawn criticism from customers and competitors. Some argue that this strategy locks in customers by sacrificing other options, while others disclose how this sales strategy bundles necessary related software with the chips.
At the event held at Stanford University last week, DOJ antitrust director Kanter warned that while “AI holds great promise,” its unique features pose a new threat to human creativity and innovation.