The US Department of Justice and the Federal Trade Commission (FTC) are set to launch an antitrust probe into Microsoft, OpenAI, and Nvidia’s market power in the AI sector. The DOJ-FTC agreement states that the DOJ will probe Nvidia while the FTC will handle Microsoft and OpenAI.
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Nvidia, with about 80% share of the AI chip market, is facing allegations of anti-competitive practices. The company’s large market share enables it to have high gross margins of between 70% and 80%. The DOJ will examine whether Nvidia’s domination in the market of AI chips is unlawful according to the antitrust laws.
FTC probes Microsoft’s AI investments and partnerships
The FTC will examine Microsoft’s and OpenAI’s practices. Microsoft’s $13 billion investment in OpenAI’s for-profit subsidiary, which translates to a 49% stake, is a focal point. The agency is also probing into Microsoft’s $650 million acquisition of AI startup, Inflection AI, due to suspicions that the deal might not have been reported as a merger.
Microsoft said that the deal with Inflection AI helps to speed up the development of the Copilot program while giving Inflection the ability to continue with its own goals.
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“Our agreements with Inflection gave us the opportunity to recruit individuals at Inflection AI and build a team capable of accelerating Microsoft Copilot while enabling Inflection to continue pursuing its independent business and ambition as an AI studio. We take our legal obligations to report transactions seriously and are confident that we have complied with those obligations.”
Microsoft spokesperson
Source: Communications Today
The FTC has already launched an investigation into OpenAI for possible violations of consumer protection laws. The probe started in July last year and relates to the alleged infringement of the consumer’s rights concerning their data security.
“The market inquiry will review the investments and partnerships being formed between AI developers and major cloud service providers.”
FTC Chair, Lina Khan
Antitrust official highlights the risk of big tech dominance in AI
Speaking at a recent AI conference at Stanford University, DOJ antitrust chief Jonathan Kanter highlighted the importance of examining the structures and trends in the AI industry. Stating that the use of large amounts of data and computational resources can perpetuate the dominance of large companies.
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“Regulators must act quickly to ensure that powerful tech companies do not control the market.”
Jonathan Kanter
The antitrust chief further added that the division will act speedily to map out potential monopoly pressure points in the ballooning AI technology sector.