Microsoft Faces FTC Probe Over AI Deal with Inflection
Investigation Raises Concerns About Non-Disclosure
Washington
CNN
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Antitrust Regulators Increasing Scrutiny of AI Industry
The Federal Trade Commission is investigating a recent Microsoft deal with artificial intelligence startup Inflection, according to a person familiar with the matter, as antitrust regulators in the US ramp up scrutiny of the red-hot AI industry.
Microsoft’s Acquisition of Inflection Under the Spotlight
In March of this year, Microsoft announced a hiring decision that involved acquiring Inflection’s co-founders and a significant number of its staff to lead its Copilot program. The deal also included Microsoft hosting Inflection’s AI model on its cloud platform, with a reported payment of $650 million to Inflection. Although Microsoft described it as a hiring decision and not an acquisition, the FTC probe aims to determine whether the investment constituted an acquisition that Microsoft failed to disclose to the government.
FTC & DOJ Close to Final Agreement on AI Oversights
The investigation comes as antitrust officials at the Federal Trade Commission (FTC) and the Department of Justice (DOJ) are reportedly close to reaching a final agreement on how to jointly oversee AI giants such as Microsoft, Google, Nvidia, OpenAI, and others. The agreement would see the DOJ taking the lead on investigating Nvidia, the FTC responsible for investigating Microsoft and OpenAI, and the DOJ continuing its role in overseeing Google. The focus of these investigations will be on whether these companies have leveraged their dominant positions in the AI industry to harm competition through abusive and illegal behavior.
Anticipation of Broader Crackdown on AI Sector
The impending agreement between the FTC and DOJ signals a broader crackdown on some of the biggest players in the AI sector. Sarah Myers West, managing director of the AI Now Institute and a former AI advisor to the FTC, states that enforcers are preparing for a sweeping probe of the industry that has attracted significant investment, captivated consumers, and raised concerns regarding job displacement, discrimination, and fraud.
Regulation Challenges in the US AI Industry
The division-of-labor agreement between the FTC and DOJ reflects the challenges faced by regulators in the United States when it comes to AI regulation. While the US lags behind other regions such as the European Union in implementing robust AI rules, enforcers are increasingly trying to apply existing laws to the industry due to limited prospects for new legislation. The EU AI Act, for example, has strict rules on the use of AI in high-risk contexts, preventing social scoring systems and biometric-based tools that can guess personal information. The agreement between the FTC and DOJ signals an attempt to ensure competition and preserve consumer interests in the rapidly advancing field of AI.
Raising Concerns About Tech Monopolies & AI
Critics have long expressed concern over major tech companies monopolizing sectors of the economy. This has led to high-profile antitrust suits against companies such as Amazon, Apple, Google, Meta, and Microsoft. With the growing influence of AI, there are fears that tech giants could abuse their power in the industry. Exclusive partnerships between tech giants and AI startups are seen as potential tactics to maintain dominance. The ongoing study by the FTC on such agreements, including Microsoft’s relationship with OpenAI, examines these concerns within the context of competition and consumer protection.
Stronger Oversight with Criminal Penalties on the Table
The DOJ’s role in overseeing Nvidia indicates a potential escalation in enforcement, including the possibility of criminal penalties. Jonathan Kanter, the DOJ’s antitrust chief, highlighted the need to learn from historical sources of market power and preserve competition in the AI industry. Concerns include gatekeeping tactics, denying necessary supplies to competitors, and making it difficult for consumers to switch providers. The DOJ’s focus on AI issues is further emphasized by the hiring of AI expert Susan Athey as its chief economist.
This story has been updated with additional context and developments.
Questions and Answers
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What is the focus of the FTC probe into Microsoft?
The FTC is investigating whether Microsoft’s deal with Inflection constituted an acquisition that the company failed to disclose to the government.
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Which agencies are nearing a final agreement on AI oversight?
The Federal Trade Commission (FTC) and the Department of Justice (DOJ) are reportedly close to reaching a final agreement on jointly overseeing AI giants such as Microsoft, Google, Nvidia, OpenAI, and others.
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What would be the focus of the investigations by the FTC and DOJ?
The investigations would focus on whether the companies have used their dominant positions in the AI industry to harm competition through abusive and illegal behavior.
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Why is the agreement between the FTC and DOJ significant?
The agreement indicates a broader crackdown on major players in the AI sector and reflects the challenges faced by regulators in the US in implementing robust AI regulation.
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What is the concern regarding tech monopolies and AI?
There are concerns that tech giants could abuse their power by forming exclusive partnerships with AI startups, potentially maintaining dominance in the industry.
