US ready for antitrust battle against AI giants Nvidia, OpenAI, Microsoft

US Antitrust Regulators Intensify Scrutiny on AI Developers

The largest antitrust authorities in the United States are ramping up their investigations into the country's most influential developers of artificial intelligence. The Justice Department (DOJ) and the Federal Trade Commission (FTC) have initiated and divided investigations into Nvidia, Microsoft, and other key players. According to leading news reports, the DOJ will spearhead an inquiry into Nvidia's market dominance for microprocessors essential for AI technology, while the FTC will focus on antitrust probes concerning Microsoft and others.

This heightened scrutiny is part of a broader initiative by the Biden administration aimed at curbing perceived anticompetitive practices across various sectors—from healthcare to technology. Previous allegations have been made against tech giants such as Apple and Amazon. Additionally, the administration has claimed that Microsoft's acquisition of Activision Blizzard could monopolize the gaming industry. Another significant case involves allegations against Alphabet's dominance in the search market, which is currently awaiting a judicial decision.

Despite the administration's aggressive stance, their success has been mixed. The FTC failed to block Microsoft's acquisition of Activision Blizzard and also fell short in a separate case to prevent Meta from acquiring the virtual reality company Within. However, the FTC has made it clear that it is keenly aware of the emerging field of AI and is monitoring potential anticompetitive issues within this landscape.

If regulators decide to pursue antitrust actions, they must first demonstrate to a judge that they have identified a relevant market and the products or services at the center of their claims. "DOJ and FTC are notorious for not divulging the specifics of what they're focusing on and where they are in an investigation," said antitrust attorney David Reichenberg, a partner with Manatt, Phelps & Phillips. Regulatory concerns often arise when a company controls a critical resource necessary for market competition, Reichenberg noted. Nvidia’s semiconductors, vital for AI development, could be under scrutiny to ensure they remain accessible and reasonably priced.

Last July, the FTC began an investigation into OpenAI’s data collection practices and potential harms caused by its large language models. In January, the FTC expanded its query to include deals between major tech firms and AI developers, including Microsoft’s $13 billion investment in OpenAI and Alphabet’s partnership with another AI developer. The Wall Street Journal reported that the FTC's probe into Microsoft will now include an examination of a deal Microsoft made with AI developer Inflection. The FTC is interested in why Microsoft opted to pay Inflection a $650 million licensing fee to resell Inflection's technology instead of purchasing it outright, particularly since Microsoft also acquired the majority of Inflection’s staff as part of the agreement.

Responding to these queries, a Microsoft spokesperson explained that their agreements with Inflection allowed them to recruit Inflection AI staff and accelerate the development of their AI chat interface, while enabling Inflection to maintain its independent business and ambitions as an AI studio. "We take our legal obligations to report transactions under the HSR Act seriously and are confident that we have complied with those obligations," the spokesperson stated. Both companies have reportedly received subpoenas requesting information about the deal. Nvidia has declined to comment on these reports.

Michael Carrier, an antitrust expert and co-director of Rutgers Institute for Information Policy and Law, remarked that regulators assessing the Microsoft agreement against antitrust laws will focus on the substance rather than the structure of the deal. "The agency will try to determine whether Microsoft restructured this deal in a way that gave it control of InflectionAI while avoiding FTC review of the transaction," Carrier noted.