Photo Credit: Microsoft
The Federal Trade Commission (FTC) is investigating Microsoft's recent agreement with artificial intelligence startup Inflection, signaling heightened scrutiny of the burgeoning AI industry by U.S. antitrust regulators.
In March, Microsoft announced that it had hired Inflection's co-founders and several staff members to spearhead its Copilot program. Inflection's AI model would also be hosted on Microsoft's cloud platform. This move involved a $650 million payment from Microsoft to Inflection. Microsoft described this transaction as a hiring decision rather than an acquisition.
The FTC's investigation aims to determine whether Microsoft's investment in Inflection constitutes an undisclosed acquisition, according to a source familiar with the matter. This probe is part of a broader crackdown by the FTC and the Department of Justice (DOJ) on major AI players like Microsoft, Google, Nvidia, and OpenAI.
The FTC and DOJ are finalizing an agreement on how to oversee these AI giants. The DOJ will lead the investigation into Nvidia, while the FTC will focus on Microsoft and OpenAI. This collaborative effort seeks to address potential anti-competitive behaviors within the AI industry.
Sarah Myers West, managing director of the AI Now Institute and former AI advisor to the FTC, emphasized the significance of this agreement. 'Clearance processes like this are usually a key step before advancing an investigation. This is a clear sign they’re moving quickly here", West stated.
In response, a Microsoft spokesperson defended the partnership with Inflection, asserting, "Our agreements with Inflection gave us the opportunity to recruit individuals at Inflection AI and build a team capable of accelerating Microsoft Copilot, while enabling Inflection to continue pursuing its independent business and ambition as an AI studio". The spokesperson added that Microsoft is confident it has complied with all reporting obligations.
This investigation underscores the increasing regulatory focus on the AI sector, which has captivated investors and consumers while raising concerns about potential abuses of power. FTC Chair Lina Khan has warned about the risks of unchecked AI, including fraud and scams. The FTC is also investigating Reddit's AI content licensing practices and OpenAI for possible consumer protection law violations.
As AI technology continues to evolve, U.S. regulators are seeking to apply existing laws to ensure fair competition and prevent monopolistic practices. This approach contrasts with the European Union's proactive stance on AI regulation, exemplified by the EU AI Act, which imposes strict rules on high-risk AI applications. With major tech companies like Microsoft and Nvidia at the forefront of AI innovation, regulators are vigilant about preventing these firms from leveraging their dominance to stifle competition. The ongoing investigations highlight the critical balance between fostering innovation and ensuring a fair, competitive market.
