Why Microsoft, OpenAI and Nvidia are facing antitrust investigations | Technology

The United States Department of Justice and the Federal Trade Commission (FTC) have reportedly reached an agreement on how they will pursue an antitrust investigation into technology giants Microsoft, Nvidia and Open AI.

Companies are all important players in generative AI: OpenAI is the nonprofit startup behind ChatGPT, the wildly successful AI-powered chatbot. Microsoft, the world’s largest company by market capitalization, has invested more than $13 billion in OpenAI and holds a 49% stake in the company’s for-profit subsidiary.

Chipmaker Nvidia is a global leader in graphics processing units (GPU), a key piece of hardware needed in AI. The company recently reached a valuation of $3 trillion, surpassing Apple to become the second largest company in the world.

U.S. authorities likely want to determine whether tech giants used anticompetitive means to dominate the burgeoning AI industry.

Under the terms of the settlement, which has been reported by several US media outlets, the FTC will investigate Microsoft and Open AI, while the DOJ 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 handful of companies over the industry and whether this will overtake smaller competitors and startups with unfair business practices.

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

The cases are part of a major political shift in the U.S. over the past five years toward more regulation after years and years of more pro-market attitudes, according to Dirk Auer, director of competition policy at the International Center for Law and Economics in Portland, Oregon.

“Officials in both the United States and the European Union are very interested in bringing cases in the generative AI space. In their opinion, this is the next big thing, and they think, rightly or wrongly, that they failed to present competition cases in the early years of Web 2.0 and that this led to greater concentration in less competitive markets than would otherwise have been the case. been. the case,” Auer told Al Jazeera.

Why are investigations being split between two government agencies?

Both the FTC and DOJ are responsible for enforcing federal antitrust laws.

The DOJ is a criminal enforcement agency while the FTC is a civil enforcement agency, but their work can overlap. Before initiating an antitrust investigation, the two agencies are required to notify each other, as they share responsibilities.

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

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

Why are they acting now?

US antitrust lawyer Barry Bennett said both law enforcement agencies may be acting before the statute of limitations expires or trying to make progress in their investigations well before the US presidential election in November.

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

In this climate, the FTC and DOJ have already had their hands full this year. The DOJ filed an antitrust case in March against Apple for monopolizing the U.S. smartphone market, while the FTC is also separately investigating a $650 million deal between Microsoft and Inflection, another AI startup.

Did these companies expect an investigation?

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

In January, the FTC launched an inquiry into investments made by Microsoft, Amazon and Alphabet – Google’s parent company – in OpenAI and Anthropic, another generative AI company.

At the time, FTC President Lina M. Khan said the agency hopes to “clarify whether investments and partnerships pursued by dominant companies risk distorting innovation and undermining fair competition.”

What could a lawsuit achieve?

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

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

Bennett said that these two cases “unlocked enormous creative potential and greatly improved innovation in the technology sector”.

Auer said, however, that he was unsure whether a case against Nvidia, Microsoft and Open AI would hold up in court.

“There are two basic problems with these AI cases. The first is that right now the generative AI space looks very, very competitive and that doesn’t make it an ideal target for antitrust intervention,” Auer said.

“The second big problem is that these deals with big tech companies appear to be extremely valuable to generative AI startups,” Auer said, adding that more regulation would also mean that funding and investment deals would take longer to be approved, slowing new developments. research and innovation.