FTC and Department of Justice Share Responsibility for Antitrust Oversight of Artificial Intelligence – AI: Washington Report | Mintz – Viewpoints on Antitrust Law

(co-author: Raj Gambhir)

In early June, the Federal Trade Commission (FTC) and the Department of Justice (DOJ) reached an agreement to share responsibility for overseeing artificial intelligence. The FTC will oversee competitive concerns of major software makers, while the Justice Department will investigate the conduct of a major chipmaker.
In a recent interview, the Justice Department’s Jonathan Kanter warned that competition authorities must act “urgently” to prevent excessive consolidation in the AI space.
Kanter said the FTC and Justice Department are particularly interested in assessing the potentially anticompetitive effects of “acqui-hire” arrangements, in which more established technology companies partner with smaller companies specializing in emerging technologies such as artificial intelligence to jointly produce products. and services.

Amid concerns about concentration in the emerging AI industry, Jonathan Kanter assured in a recent interview that the Department of Justice (DOJ) will “urgently” investigate the AI sector. Kanter, an assistant attorney general in the antitrust division, said the Justice Department is investigating the “monopoly bottlenecks and competitive landscape” of artificial intelligence. According to Kanter, regulators are concerned that the AI industry is now “at the peak of competition, not at the bottom.” That’s why Kanter believes the Justice Department must act to prevent powerful incumbents from taking control of the AI market.

Antitrust enforcement agencies share AI oversight responsibilities

Antitrust enforcers like FTC Chair Lina Khan have made clear that regulators are conducting a comprehensive review of the AI economy as a precursor to broad enforcement actions. Khan said the FTC is “looking at the AI stack, from chips to cloud, downstream models and applications, and determining the structure of the market.”

As we’ve discussed in previous bulletins, the AI ecosystem includes a variety of players. In addition to computer scientists, producing cutting-edge AI models requires the efforts of key miners, cloud computing operators, chipmakers, and more.

Recent events suggest that competition authorities are preparing to vigorously pursue potential antitrust violations in the area of artificial intelligence. In early June, the two main federal antitrust enforcers, the Department of Justice and the Federal Trade Commission (FTC), reached an agreement to share AI enforcement efforts. The FTC will oversee competitive concerns of major software makers, while the Justice Department will investigate the conduct of a major chipmaker. This agreement is a decisive step towards introducing greater antitrust control of the artificial intelligence economy.

AI partnerships: the next target for law enforcement?

Regarding upcoming AI investigations, Kanter said the Justice Department is examining whether its corporate strategy “is making decisions that demonstrate that companies are not concerned with maximizing profitability or generating shareholder value, but rather with competitive consequences.” Antitrust enforcers are particularly interested in major players in the AI space adopting a novel business strategy that regulators have dubbed “employment capture.”

An acquisition is a strategy in which a more established technology company partners with a smaller company that specializes in an emerging technology such as artificial intelligence. The larger company can then leverage the smaller company’s knowledge and experience to produce lucrative products and services without having to acquire the smaller company. Unlike an acquisition or merger, acquisition arrangements in most cases do not require mandatory Hart-Scott submission and review. Defenders of the acqui-hiring model claim that this strategy is pro-competitive and drives innovation.

Antitrust enforcement authorities, however, are not so sure. “We focus on facts. If the form is different but the content is the same, we will not hesitate to act,” assured Kanter. “We look at what the raw materials are to produce the product. Whether it’s steel or engineers, it fits into the traditional paradigm of what we care about.”

Conclusion: Competition authorities lead the charge?

As we have discussed in detail in previous bulletins, in the absence of Congressional action on AI policy, the executive branch and its related agencies have taken the lead in regulating AI at the federal level. The FTC and DOJ have played significant roles in President Biden’s government-wide approach to AI. Over the past year and a half, each agency has published significant AI business guidance, filed cases against AI companies both large and small, and held conferences with foreign counterparts on AI policy.

Given the key roles the FTC and the Department of Justice are playing in the emerging area of artificial intelligence regulation, stakeholders should closely monitor the policies and statements issued by these agencies. We will continue to monitor, analyze and report on the Department of Justice and FTC announcements and initiatives. If you have questions about current practices or how we proceed, please contact us.

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