Why antitrust authorities are reportedly gearing up for a fight over AI

Companies like OpenAI, Microsoft, and Nvidia have positioned themselves as winners in the race to own the latest wave of AI. But could they perhaps be too dominant?

That’s what federal regulators charged with ensuring fair competition between companies will be examining in the coming months, according to recent reports in the New York Times and other outlets. The Federal Trade Commission and the Department of Justice have reportedly come to a deal to divvy up oversight as they open a probe into the burgeoning space.

What’s behind the move: The antitrust investigation is just one front in how the Biden administration aims to shape control of this new technology and curb its potential worst tendencies.

Biden has also staffed these agencies with leaders who have sought to reinvigorate how the government enforces antitrust laws after decades of a more hands-off approach.

The FTC previously announced an inquiry into partnerships between tech giants and buzzy startups, like Microsoft and OpenAI, in January, in a likely effort to examine whether these arrangements are efforts to skirt the legal reviews required for a more traditional acquisition.

FTC Chair Lina Khan, a noted critic of Big Tech before joining the administration, has said these efforts are meant to tackle problems as the tech develops and before dominance is cemented.

What’s the deal: Under this new reported deal, the DOJ will take point on an investigation of Nvidia, which has cornered the market on AI chips and become the world’s second-most valuable public company as a result, per Axios.

The FTC, meanwhile, is reportedly investigating Microsoft’s $13 billion investment in OpenAI. The Washington Post reported that the FTC is also looking into Microsoft’s $650 million deal with AI startup Inflection and whether the quasi-acquisition was an effort to “skirt government antitrust reviews.”

As major federal antitrust enforcers, it’s not the first time the two agencies have divided and conquered in an investigation like this. They previously reached a similar arrangement in 2019 for a probe into Silicon Valley giants Facebook, Amazon, Apple, and Google.

Why it matters: Network effects tend to mean digital markets skew toward dominance by a small number of players, according to Stephen Weymouth, a distinguished associate professor at Georgetown University’s McDonough School of Business and author of the book Digital Globalization: Politics, Policy, and a Governance Paradox. Weymouth said that “the biggest companies need to recognize that this administration is unwilling to turn a blind eye to behavior that undermines competition,” but noted that Congress has so far done little in this arena.

Weymouth said the move is a sign that the Biden administration is serious about fostering competition between companies as the US faces a rivalry with China over the fast-emerging tech.

“The era of loose regulatory scrutiny that existed prior to recent generative AI advances is over for the time being,” Weymouth said in an email. “This administration seems to recognize the enormous potential for AI to transform the economy, and they are unwilling to sit by and let all the advantages accrue to a small handful of companies.”

“This might be good news for smaller players looking to compete, though it’s unclear whether antitrust policy has enough teeth to deter concentration and enhance competition in the industry, especially prior to any obvious harm to consumers,” he added.