US Regulators to Open Antitrust Investigations into Microsoft, OpenAI and Nvidia

The US Justice Department and the Federal Trade Commission (FTC) have reached an agreement that paves the way for potential antitrust investigations into Microsoft, OpenAI and Nvidia, according to a source familiar with the matter.

The move reflects growing regulatory scrutiny over the concentration of power in the artificial intelligence (AI) industry. Microsoft and Nvidia, both dominant players in their respective fields, are among the world's largest companies by market capitalisation, with Nvidia's market value recently surpassing $3 trillion.

Antitrust enforcers in the US have raised several concerns about AI, including the advantage Big Tech companies have due to their extensive access to data for training AI models, the impact of generative AI on the market for creative work and the potential for companies to use partnerships to bypass merger review processes.

This new division of responsibilities between the DOJ and FTC mirrors a 2019 agreement to split enforcement efforts against Big Tech, which led to the FTC pursuing cases against Meta and Amazon, and the DOJ suing Apple and Google. These cases are ongoing, and the companies have denied any wrongdoing.

Although OpenAI's parent organisation is a non-profit, Microsoft's $13 billion investment in a for-profit subsidiary gives it a significant stake. Under the new agreement, the Justice Department will investigate Nvidia for potential antitrust violations, while the FTC will examine the conduct of OpenAI and Microsoft. This agreement, reached over the past week, is expected to be finalised in the coming days.

Nvidia holds approximately 80 per cent of the AI chip market, including custom AI processors made for cloud computing companies like Google, Microsoft, and Amazon. This market dominance allows Nvidia to report gross margins between 70 per cent and 80 per cent. Spokespersons for Nvidia and OpenAI declined to comment on the regulatory agreement, while Microsoft stated it takes its legal obligations seriously and is confident it has complied with them.

In January, the FTC ordered OpenAI, Microsoft, Alphabet, Amazon and Anthropic to provide information on recent investments and partnerships involving generative AI companies and cloud service providers. Additionally, the FTC launched an investigation into OpenAI in July last year over claims it had violated consumer protection laws by putting personal data and reputations at risk.

Last week, DOJ antitrust chief Jonathan Kanter expressed concerns at a Stanford University AI conference about the structures and trends in AI, highlighting that the technology's reliance on massive amounts of data and computing power can give dominant firms a substantial advantage. The DOJ and FTC, led by Chair Lina Khan, share jurisdiction over federal competition law and aim to avoid duplicative investigations.

Bill Baer, a former antitrust leader at both agencies, noted that each agency typically leads in areas where it has the most expertise, though occasionally, the heads of both agencies will decide on the division of responsibilities.

Additionally, the FTC is investigating Microsoft's $650 million deal with AI startup Inflection AI, scrutinising whether the deal was an attempt to circumvent merger disclosure requirements. The agreement, made in March, allowed Microsoft to use Inflection's models and hire most of the startup's staff, including its co-founders. Microsoft stated that this deal helped accelerate its work on Microsoft Co-pilot while allowing Inflection to continue pursuing its independent business goals as an AI studio.

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