Why Microsoft, OpenAI and Nvidia face antitrust investigations | Technology

The US Department of Justice and the Federal Trade Commission (FTC) have reportedly reached an agreement on how to conduct an antitrust investigation into tech giants Microsoft, Nvidia and Open AI.

All of these companies are major players in the field of generative AI: OpenAI is the non-profit startup behind ChatGPT, the hit AI chatbot. Microsoft, the world’s largest company by market capitalization, has invested more than $13 billion in OpenAI and owns a 49 percent stake in the company’s for-profit subsidiary.

Chipmaker Nvidia is a global leader in graphics processing units (GPUs), a key piece of hardware needed in artificial intelligence. The company recently reached a valuation of $3 trillion, overtaking Apple to become the world’s second-largest company.

U.S. authorities are likely looking to determine whether tech giants have used anti-competitive measures to dominate the burgeoning artificial intelligence industry.

Under the terms of the deal, reported by multiple US media outlets, the FTC will reportedly investigate Microsoft and Open AI, and the Department of Justice will investigate Nvidia.

What will the US government investigate?

U.S. regulators – as well as observers outside the government – are concerned about the dominance of a few companies over the industry and whether it will overtake smaller competitors and startups with unfair business practices.

The US government has previously investigated Google’s search engine monopoly and Meta’s dominance over social media in light of its ownership of Facebook, Instagram and WhatsApp.

According to Dirk Auer, director of competition policy at the U.S. International Center for Law and Economics, these cases are part of a fundamental shift in U.S. policy over the past five years toward favoring more regulation after years of bias more pro-market. Portland, Oregon.

“Law enforcement agencies in both the United States and the European Union are very keen to bring cases into the area of ​​generative artificial intelligence. “They think it’s the next big thing and they believe, rightly or wrongly, that in the early years of Web 2.0 they didn’t bring competition cases, which led to more concentration in less competitive markets than would otherwise have been the case in this case,” Auer told Al Jazeer.

Why are investigations split between two government agencies?

Both the FTC and the Department of Justice are responsible for enforcing federal antitrust laws.

The Department of Justice is the criminal enforcement agency and the FTC is the civil enforcement agency, but their work may overlap. Before initiating an antitrust investigation, both agencies are required to notify each other because they share responsibilities.

The two agencies worked together in 2019 on a landmark case against Facebook, Amazon, Apple and Google’s parent company Alphabet, which resulted in each technology company being sued for allegedly violating antitrust laws.

Experts say investigations into Microsoft, Nvidia and OpenAI could take a similar approach.

Why are they taking action now?

U.S. antitrust lawyer Barry Bennett said both enforcement agencies could take action before the statute of limitations expires or seek to advance investigations well before November’s U.S. presidential election.

There may also be an “emerging sense that Congress lacks the coherence and will to enact legislation to provide a regulatory alternative to litigation against companies that dominate the AI ​​ecosystem,” Bennett told Al Jazeera.

In this situation, the FTC and DOJ have already been busy this year. The Justice Department filed an antitrust lawsuit against Apple in March for monopolizing the U.S. smartphone market, while the FTC is separately investigating a $650 million deal between Microsoft and Inflection, another artificial intelligence startup.

Did these companies expect an investigation?

Neither Microsoft, OpenAI, nor Nvidia should be surprised when federal investigators come knocking.

In January, the FTC opened an investigation into investments made by Microsoft, Amazon and Alphabet – Google’s parent company – in OpenAI and Anthropic, another generative artificial intelligence company.

FTC Chair Lina M. Khan said at the time that the agency hoped to “shed light on whether investments and partnerships made by dominant companies risk distorting innovation and undermining fair competition.”

What can a lawsuit achieve?

The goal of the investigation would be to make the tech industry more competitive – something that regulators have been credited with achieving in the past, according to Bennett.

The US government was famous for breaking up telecommunications giant AT&T in 1984, and in 2001 it won a landmark case against Microsoft over its monopoly on web browsers for the Windows operating system.

Bennett said the two cases “both unleashed enormous creative potential and greatly improved innovation in the technology sector.”

However, Auer said he is not sure whether the case against Nvidia, Microsoft and Open AI will go to trial.

“There are two main problems with AI cases. “First of all, right now the generative AI space appears to be very, very competitive, which doesn’t make it an ideal target for antitrust intervention,” Auer said.

“The second important issue is that deals with big tech companies seem to be extremely valuable for generative AI startups,” Auer said, adding that more regulation would also mean that financing and investment deals would take longer to be approved, slowing down further research and innovation.