A recent report from the Federal Trade Commission (FTC) has raised alarms regarding Microsoft’s substantial $13 billion investment in OpenAI, warning that it could further entrench the company’s leading position in both cloud computing and the emerging artificial intelligence sector.
The FTC noted that Microsoft’s arrangement with OpenAI, alongside collaborations between Amazon and Google with AI firm Anthropic, may pose risks of larger tech companies potentially taking full ownership of AI innovators in the future.
Since the launch of ChatGPT over two years ago, which sparked a surge of interest in generative AI, numerous leading AI startups have sought support from major tech corporations to tackle the high costs associated with developing sophisticated AI technologies. However, the FTC’s report suggests that these investments could compel startups to allocate funding towards the investors’ own products and services. It also cautioned against concentrating valuable AI talent within these large entities, along with the potential for these companies to acquire sensitive data regarding chip development, model training, and data center infrastructure.
FTC Chair Lina Khan emphasized the significance of the report, stating it highlights how partnerships with major tech firms can create dependency, limit startups’ access to essential AI resources, and expose critical information that might jeopardize fair competition.
The report also indicated that at least one of the major tech companies gained access to “confidential and potentially sensitive financial performance information” through its agreement with an AI startup, including weekly updates on revenues and customer trends.
Moreover, it pointed out that at least one contract allowed a major tech firm to utilize outcomes from an AI startup’s models—like the responses generated by a chatbot—to enhance its own AI capabilities, referring to this information as “synthetic data.”
Representatives from Google, Amazon, and Anthropic declined to provide comments, while OpenAI did not respond to requests for information.
Microsoft’s deputy general counsel, Rima Alaily, remarked that the partnership with OpenAI has fostered significant innovation within the AI sector, leading to the creation of thousands of new startups in both the U.S. and globally.
Market Studies
The FTC possesses the authority to initiate market studies that could uncover vital insights into industry trends, which may guide future regulatory actions. It’s uncertain how the commission’s new leadership will utilize the findings of this report.
Last year, the FTC launched its investigation focusing on billions invested by leading cloud-service providers into various AI firms, specifically examining substantial investments in entities like OpenAI and Anthropic, founded by former OpenAI staff.
Utilizing its 6(b) authority, the FTC is equipped to issue subpoenas for market studies. Typically, the agency releases a report following its analysis of the collected data, although this process can span several years.
Due to the nature of their agreements, none of the companies alerted U.S. antitrust authorities about their deals in advance.
The FTC expressed concerns that collaborations between tech titans and AI companies could lead to dominant players securing “exclusivity rights” to the tools created by their AI partners, potentially deterring these AI companies from engaging with multiple tech firms due to increased “switching costs.”
Skilled Talent
The report also raised issues regarding the implications of these partnerships on the engineering talent market. The commission questioned whether these collaborations might centralize access to skilled professionals within a few large firms. It noted that the competencies required for developing and launching generative AI models are not only rare but also difficult to acquire outside of employment with major AI developers or their associated cloud services.
The FTC criticized the practice where investments from cloud giants into AI companies also ultimately benefit the investors’ businesses. Often, substantial portions of these investments take the form of credits designated for cloud computing services, or come with requirements for AI firms to utilize these cloud services for spending.
For instance, much of Microsoft’s investment in OpenAI involved credits for its Azure cloud platform. The report referred to this strategy as “circular spending,” suggesting it provides a financial buffer for Microsoft, Amazon, and Google against any potential losses.
The agency has also been investigating whether OpenAI has breached consumer protection laws concerning its widely used ChatGPT chatbot. Additionally, in November, the FTC initiated a broad antitrust investigation into Microsoft that encompasses its AI investments among other areas.
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(This story has not been edited by NDTV staff and is auto-generated from a syndicated feed.)
