Two key government agencies in the US — the Justice Department and the Federal Trade Commission (FTC) — are joining forces to investigate three big technology companies: Microsoft, OpenAI, and Nvidia.
These companies are all leaders in artificial intelligence (AI), and the government is worried they might be breaking the rules.
The Justice Department will look into Nvidia, while the FTC will check on Microsoft and OpenAI, according to a report by the New York Times.
Why is the probe being conducted?
It's not immediately clear what's the trigger for this pending probe. But there are concerns that even though OpenAI is a non-profit, Microsoft invested a lot of money in them. Other countries are also looking into this partnership between Microsoft and OpenAI.
OpenAI’s parent is a nonprofit, but Microsoft has invested $13 billion in a for-profit subsidiary, for what would be a 49 per cent stake.
NYT, citing two people with knowledge of the matter. eported that the US regulators struck the deal over the past week and it is expected to be completed in the coming days,
Another probe into Microsoft
Meanwhile, the Wall Street Journal, citing a person familiar with the matter, reported on Thursday that the FTC is said to be looking into Microsoft's $650 million deal with AI startup Inflection AI.
The moves signal growing regulatory scrutiny into the AI industry.
In January, the FTC ordered OpenAI, Microsoft, Alphabet, Amazon, and Anthropic to provide information on recent investments and partnerships involving generative AI companies and cloud service providers.
Data privacy
In July last year, the FTC opened an investigation into OpenAI on claims it had run afoul of consumer protection laws by putting personal reputations and data at risk.
At an AI conference last week, US antitrust chief Jonathan Kanter referred to “structures and trends in AI that should give us pause,” adding that the technology relies on massive amounts of data and computing power, which can give already-dominant firms a substantial advantage.
The Sherman Act, the Federal Trade Commission Act, and the Clayton Act are the three pivotal laws in the history of antitrust regulation.
Microsoft, OpenAI, Nvidia, the Justice Department and FTC did not immediately respond to requests from Reuters for comment outside regular business hours.
An "antitrust lawsuit" is a lawsuit filed under the antitrust laws designed to prevent businesses from acting in ways that limit competition.
It’s basically suing a company for unfair business practices that hurt competition, a legal doctrine that goes back more than 100 years.
• Trusts: In the late 1800s, big businesses used a legal structure called a "trust" to combine and control entire industries. This essentially gave them a monopoly, stifling competition and harming consumers.
• Antitrust: Laws were passed to fight against these trusts and similar practices that limit competition. These became known as "antitrust laws."
• Lawsuit: A lawsuit is a legal case brought against someone who is accused of wrongdoing.
• The Sherman Act, the Federal Trade Commission Act, and the Clayton Act are the three main laws in the history of US antitrust regulation.
What is an antitrust law?
In the US, antitrust law is a collection of mostly federal laws that regulate the conduct and organisation of businesses in order to promote competition and prevent unjustified monopolies.
Antitrust laws are like rules against unfair play in the business world. They stop companies from doing things that make it hard for others to compete.
There are two main organisations that enforce these laws:
- The FTC has a special team called the Bureau of Competition to look into these issues.
- The Justice Department also has an Antitrust Division that helps enforce these laws.
There are also special investigators in some states who keep an eye out for unfair business practices within those states.
What was the Microsoft antitrust case?
The Microsoft antitrust case came to be one of the high-profile cases a few decades ago.
In the 1990s, US federal regulators sued Microsoft, which was at that time the world’s leading software company. The FTC launched an investigation as a response to the rising market share of the company in the personal computer market.
The investigation aimed to determine whether Microsoft was trying to monopolise the personal computer market. The federal agency soon ended its investigation, only to be brought up again by the US Department of Justice in 1998.
Antitrust litigation
Under US antit-trust laws, consumers have various protections under both depending upon the specific issue and the state in which they reside or do business.
According to the FTC, antitrust laws “form the foundation of our free economy” by promoting consumer interests and supporting “unfettered markets.”
Through antitrust laws, consumers have access to more choices in the market for goods and services, and consumers have access to lower prices.
