In June 2024, the New York Times reported that the US Department of Justice (DOJ) and the US Federal Trade Commission (FTC) will investigate three major players in the AI industry: Microsoft, OpenAI, and NVIDIA. This is to ensure that they adhere to antitrust laws, thereby maintaining a competitive environment within the AI sector.
DOJ’s Investigation into NVIDIA
NVIDIA is a top AI chip maker, with a 70-95% market share. This includes the custom AI processors made by the cloud computing companies like Google, Microsoft and Amazon. These chips are essential for training and deploying AI models, including advanced systems like OpenAI’s ChatGPT. The company’s market capitalisation has exceeded $3 trillion, surpassing Apple. This market power has drawn the attention of the DOJ, which is set to investigate the company’s business practices. Although the specifics of the investigation are not yet known, the media reported that the DOJ will focus on how NVIDIA distributes its chips and whether it uses its software to pressure customers into using its products.
The outcome of the DOJ’s investigation could have a significant impact on the company and the wider AI industry. If the investigation finds that NVIDIA has engaged in anti-competitive practices, it could result in regulatory action aimed at limiting its market dominance and fostering a more competitive landscape.
FTC’s Investigation into Microsoft
The Inflection AI deal
In March, Microsoft hired Inflection AI co-founder Mustafa Suleyman and nearly all its employees. The tech giant agreed to pay the startup approximately $650 million in licensing fees for the resale of its technologies. By structuring the deal this way, Microsoft avoided a formal acquisition, which would have triggered antitrust reviews. This move allowed Microsoft to acquire crucial technology and human capital without undergoing the regulatory scrutiny typically associated with mergers and acquisitions.
Open AI partnership
The FTC is also scrutinising Microsoft’s significant investment in OpenAI. This investigation runs in parallel with an inquiry underway in the European Union, in which regulators are convinced that Microsoft’s investment was a strategic move to gain control over OpenAI, circumventing antitrust regulations.
OpenAI’s GPT-4 remains the best performing model in the sector according to the most widely followed benchmarks, as released in March 2023. And if it releases its next AI model, GPT-5, as announced in May 2024, OpenAI will undoubtedly widen the gap, at least temporarily. A technological lead that benefits Microsoft, which has invested more than 13 billion dollars in the start-up and holds 49% of its capital, in addition to a seat on its board of directors.
The Times reported that Microsoft structured its minority stake in OpenAI in part to avoid antitrust scrutiny. The FTC is examining these investments and partnerships to uncover whether Microsoft is leveraging its financial power to dominate the AI market unfairly.
The antitrust investigations into Microsoft, OpenAI, and NVIDIA mark a pivotal moment in the AI industry’s evolution. As regulators take a firm stance against monopolistic behaviour and maintain a competitive market, the outcomes of these investigations will have far-reaching implications for the industry’s future. By proactively addressing potential antitrust violations, the DOJ and FTC are ensuring that the AI sector remains dynamic, innovative, and competitive, ultimately benefiting consumers and the broader economy.
Emiliya Ramazanova
M2 Cyberjustice
Promotion 2023/2024
Sources:
https://www.nytimes.com/2024/06/05/technology/nvidia-microsoft-openai-antitrust-doj-ftc.html
https://openai.com/index/openai-board-forms-safety-and-security-committee/
