Global: U.S. Sets Stage for Antitrust Probes into Microsoft, OpenAI, and Nvidia

The U.S. Justice Department and the Federal Trade Commission (FTC) have reached an agreement paving the way for potential antitrust investigations into the dominant roles of Microsoft, OpenAI, and Nvidia in the artificial intelligence (AI) industry. This agreement, according to a source familiar with the matter, highlights increasing regulatory scrutiny over concentration in AI-related industries.

Regulatory Scrutiny in AI

Microsoft and Nvidia, two of the world’s largest companies by market capitalization, have seen their market value soar, with Nvidia recently surpassing $3 trillion. The Justice Department and FTC’s agreement indicates growing concerns over the concentration of power within these companies. Antitrust enforcers have publicly voiced worries about Big Tech’s access to data for training AI models, the impact of generative AI on the creative market, and partnerships that might bypass merger review processes.

Division of Investigative Responsibilities

The agreement mirrors a 2019 arrangement where the two agencies divided enforcement actions against Big Tech. This led to the FTC bringing cases against Meta and Amazon, while the DOJ pursued Apple and Google. These cases are ongoing, and the companies have denied any wrongdoing.

For this new round of investigations, the Justice Department will focus on whether Nvidia has violated antitrust laws, while the FTC will examine the practices of OpenAI and Microsoft. This division of labor was finalized over the past week and is expected to be formally completed soon.

Market Dominance and Regulatory Concerns

Nvidia holds approximately 80% of the AI chip market, which includes custom AI processors used by cloud computing giants like Google, Microsoft, and Amazon. This dominance allows Nvidia to report gross margins between 70% and 80%. Meanwhile, OpenAI, despite being a nonprofit, has received a $13 billion investment from Microsoft, giving the tech giant a 49% stake in its for-profit subsidiary.

Both Nvidia and OpenAI declined to comment on the agreement, while Microsoft stated it takes its legal obligations seriously and believes it has complied with them.

Previous and Ongoing Investigations

This regulatory move follows the FTC’s January order for companies like OpenAI, Microsoft, Alphabet, Amazon, and Anthropic to provide information on recent AI investments and partnerships. In July last year, the FTC began investigating OpenAI for potentially violating consumer protection laws by risking personal data and reputations.

Last week, Jonathan Kanter, the DOJ’s antitrust chief, expressed concerns at a Stanford University AI conference about AI structures and trends, emphasizing that massive data and computing power could give dominant firms an unfair advantage.

FTC’s Probe into Microsoft-Inflection AI Deal

Additionally, the FTC is scrutinizing Microsoft’s $650 million deal with AI startup Inflection AI, suspecting it might have been structured to avoid merger disclosure requirements. This March deal allowed Microsoft to use Inflection’s models and hire most of its staff, including co-founders. Microsoft stated that the agreement accelerates its work on Microsoft Copilot while allowing Inflection to continue as an independent AI studio.

This investigation and the regulatory agreement were first reported by the Wall Street Journal and the New York Times, respectively.

As the AI industry rapidly evolves, the DOJ and FTC are poised to ensure competitive practices and prevent monopolistic dominance by major tech players. These investigations aim to balance innovation with fair market practices, ensuring that the benefits of AI advancements are broadly distributed.