Feds to open antitrust inquiries of Microsoft, OpenAI and Nvidia

The U.S. Justice Department and the Federal Trade Commission have reached a deal that allows them to proceed with antitrust investigations into the dominant roles that Microsoft, OpenAI and Nvidia play in the artificial intelligence industry, according to a source familiar with the matter.

Under the deal, the U.S. Department of Justice will take the lead in investigating whether Nvidia violated antitrust laws, while the FTC will examine the conduct of OpenAI and Microsoft.

While OpenAI’s parent is a nonprofit, Microsoft has invested $13 billion in a for-profit subsidiary, for what would be a 49% stake.

The regulators struck the deal over the past week, and it is expected to be completed in the coming days, the person said.

The move to divvy up the industry mirrors a similar agreement between the two agencies in 2019 to divide enforcement against Big Tech, which ultimately saw the FTC bring cases against Meta and Amazon, and the DOJ sue Apple and Google for alleged violations. Those cases are ongoing and the companies have denied wrongdoing.

The agreement between the two agencies shows regulatory scrutiny is gathering steam amid concerns over concentration in the industries that make up AI.

Nvidia has roughly 80% of the AI chip market, including the custom AI processors made by the cloud computing companies like Google, Microsoft and Amazon.com. That domination helps the company report gross margins between 70% and 80%.

A spokesperson for Nvidia declined to comment on the regulators’ agreement. OpenAI did not immediately reply to a request for comment on Thursday.

The FTC is also looking into Microsoft’s $650 million deal with AI startup Inflection AI, over concerns as to whether the deal was a play to skirt merger disclosure requirements, the person said.

The unusual deal reached in March allowed Microsoft to use Inflection’s models and hire most of the startup’s staff, including its co-founders.

Microsoft said in a statement on Monday that the agreement with Inflection helped it accelerate work on Microsoft Copilot, while still allowing Inflection “to continue pursuing its independent business and ambition as an AI studio.”

The company takes its legal obligations to report transactions seriously and is confident it has complied with them, the spokesperson said.

The probe was first reported by the Wall Street Journal and the regulators’ agreement by the New York Times.

The agreement between the two regulators comes after the FTC in January ordered OpenAI, Microsoft, Alphabet, Amazon and Anthropic to provide information on recent investments and partnerships involving generative AI companies and cloud service providers.

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.

Last week, U.S. antitrust chief Jonathan Kanter referred to “structures and trends in AI that should give us pause,” at an AI conference, adding that the technology relies on massive amounts of data and computing power, which can give already dominant firms a substantial advantage.

—Gnaneshwar Rajan in Bengaluru and Jody Godoy, Reuters

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