The Federal Trade Commission (FTC) has launched an investigation into a recent deal between Microsoft and AI startup Inflection. This move signals increased scrutiny of the rapidly growing AI industry by U.S. antitrust regulators.

In March, Microsoft announced it had hired Inflection’s co-founders and several of its staff to lead its Copilot program, with Inflection’s AI model hosted on Microsoft’s cloud platform. The $650 million deal was described by Microsoft as a hiring decision rather than an acquisition. However, the FTC is investigating whether this transaction should have been reported as an acquisition.

This investigation is part of a broader effort by the FTC and the Department of Justice (DOJ) to monitor and regulate major players in the AI sector, including Microsoft, Google, Nvidia, and OpenAI. An agreement between the FTC and DOJ is expected to delineate their respective responsibilities, with the DOJ overseeing Nvidia and Google, and the FTC focusing on Microsoft and OpenAI. The investigations will examine whether these companies are using their dominant market positions to stifle competition.

FTC Chair Lina Khan has highlighted the potential risks of unchecked AI, including fraud and scams. The FTC has issued warnings to businesses about misleading claims regarding AI tools and the covert use of consumer data for AI training. The FTC is also investigating other AI-related practices, such as Reddit’s AI content licensing and OpenAI’s consumer protection compliance.

The FTC and DOJ’s agreement aims to intensify scrutiny of AI companies amidst increasing investor interest and consumer engagement with AI technologies. This agreement comes at a time when the U.S. is perceived as lagging in AI regulation compared to regions like the European Union, which has implemented stringent AI rules.

Historically, there have been concerns about tech giants monopolizing sectors of the economy, leading to antitrust actions against companies like Amazon, Apple, Google, Meta, and Microsoft. The rapid advancement of generative AI, which gained significant attention with the release of ChatGPT by OpenAI, has amplified these concerns.

Nvidia’s recent rise as the second-largest publicly traded company in the U.S. underscores the AI frenzy, with its market value surpassing $3 trillion. This reflects the increasing importance of computing power and data, which could give dominant firms a substantial market advantage.

Critics argue that exclusive partnerships between tech giants and AI startups could further entrench these firms’ dominance by “locking in” developers and securing influential stakes in AI development. The FTC is already studying Microsoft’s relationship with OpenAI as part of its ongoing investigation.

DOJ antitrust chief Jonathan Kanter has emphasized the importance of addressing potential monopolistic behaviors in the AI industry, such as gatekeeping tactics and controlling key supplies like AI chips.

As the investigation into Microsoft and Inflection unfolds, it highlights the regulatory challenges and the need for vigilance in managing the transformative impacts of AI technology on competition and market dynamics.

Source: CNN