Could Antitrust Probes Lead to AI Market Upheaval?

The boom of AI technology has been accompanied by big questions about potential regulation, and scrutiny at the federal level is heating up. The Department of Justice (DOJ) and the Federal Trade Commission (FTC) are moving forward with antitrust investigations into three of the biggest names in today’s AI market: Microsoft, OpenAI, and Nvidia, The New York Times reports.

These investigations have a long runway, but their outcomes have the potential to shake up, and potentially break up, the dominance these three companies have built in the AI market.

The Antitrust Investigations

The DOJ will head the antitrust investigation into chipmaker Nvidia, while the FTC takes point on the probe into Microsoft and OpenAI, according to the New York Times.

“This is one of the relatively rare times we [see] both of the federal antitrust agencies are working together to look at aspects of the same industry,” Spencer Weber Waller, Justice John Paul Stevens Chair in Competition Law and director of the Institute for Consumer Antitrust Studies at Loyola University Chicago School of Law, tells InformationWeek. “That's important because each agency has different laws, different resources, and slightly different expertise.”

While the DOJ and FTC both have the power to enforce antitrust laws, the DOJ has jurisdiction in industries including airlines, banks, railroads, and telecommunications. The FTC focuses on industries with high levels of consumer spending.

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Why are AI market leaders being scrutinized for potential antitrust violations?

Lina M. Khan, the chair of the FTC, made clear the argument for AI regulation and the FTC’s role in an op-ed penned for The New York Times.

“While the technology is moving swiftly, we already can see several risks. The expanding adoption of AI risks further locking in the market dominance of large incumbent technology firms. A handful of powerful businesses control the necessary raw materials that start-ups and other companies rely on to develop and deploy AI tools,” she wrote.

Nvidia has the lion’s share of the global market for GPU semiconductor chips at about 80%, according to MoneyWeek. Microsoft has invested $13 billion in OpenAI, and it recently struck a $650 million licensing deal with Inflection, an AI startup, Reuters reports.

These regulatory investigations will seek to determine if any of these companies’ dominance has been achieved by means that violate antitrust laws. “[They’re] looking to see if there are any entities that control how AI is used and whether they are misusing their power to exclude competitors,” says Weber Waller.

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The way Nvidia distributes its highly sought after chips and how its software requires customers to use its chips could be points of concern, according to The New York Times coverage.

The way Microsoft structured its deals in the AI space could be scrutinized during these investigations. As a part of its Inflection licensing deal, for example, Microsoft is hiring most of the company’s staff and plans to offer its AI models via Azure, according to Reuters.

“It seems like taking the CEO or other high-level person, almost all your employees, and licensing everything … is a merger and you're just covering it up. So, I think they're going to face that scrutiny,” says Andrew Grosso, chair of the Association for Computing Machinery (ACM) US technology policy committee’s law subcommittee and principal attorney at Andrew Grosso & Associates.

Whether the FTC and DOJ will determine if these companies have achieved dominance through any violation of antitrust law remains to be seen. “This is going to be the next … Super Bowl or World Cup of antitrust litigation if the government proceeds,” says Weber Waller.

The Potential Outcome

Just because investigations have been initiated does not necessarily mean they will result in charges and yield results that seismically reshape the AI market. “The outcome is not predetermined here,” Olivier Blanchard, research director at The Futurum Group, a technology research and advisory firm, emphasizes. “I think this is just the system doing what it's designed to do, which is just to make sure that everybody's playing by the rules and that none of these companies are acting in an anticompetitive manner.”

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Antitrust laws have existed in the United States since the late 1800s. Over the years, those laws have been used to tackle the major industries of the time; think railroads, oil, entertainment, and telecommunications.

Given the billions being poured into AI and the seemingly inevitable changes it will make to the way we live our lives, antitrust scrutiny is unsurprising. And given the complexity of the technology and the work cut out for regulators, the answer to what these antitrust investigations could mean for the market is not going to come quickly.

Other tech giants are at the center of antitrust cases that could easily take years to resolve. “We're still digesting through the courts the cases involving Amazon and Meta and Google and Apple,” Weber Waller points out.

If the DOJ and FTC do find violations of antitrust laws, they have a number of ways in which they could act. “There are injunctions to either stop a company from doing something, require a company to do something or conceivably break up a company and make them get rid of stuff,” says Weber Waller.

Major tech companies may opt to adjust their business plans ahead of any concrete allegations of antitrust violations or settle if the government moves forward with any claims. But they have deep pockets and sophisticated legal teams in their corner. AI’s biggest players may decide to fight.

Grosso, a former federal prosecutor, offers his perspective on how such clashes may play out. “I've been up against some big companies and big cases and typically the big companies will stare [you] down,” he tells InformationWeek. “As long as they have a defense of some sort, they will stand by it and they'll fight you to the end, and I think that's one of the battle grounds we are going to see.”

While the road ahead is long, these investigations do signal that regulators are getting serious.

“One of the positive outcomes of these investigations … regulators like FTC and DOJ and others [are] getting a lot more serious, putting more manpower behind understanding how to regulate AI properly and still maintain a competitive market and ecosystem,” says Blanchard.

Competition in the AI Space

While Nvidia, Microsoft, and OpenAI are dominating the AI space today, the speed at which the technology is developing suggests that the game is far from over.

Other major tech companies are looking for ways to capitalize on GenAI. “Apple announced a different approach, and the Apple approach actually may be more what consumers want,” says Jack Berkowitz, chief data officer at Securiti, an AI company focused on enabling the safe use of data and GenAI. Apple Intelligence for the company’s devices aims to set “a new standard for privacy in AI.”

AI is a relatively nascent space. Technologies like neural networks and the potential acceleration of AI capabilities with quantum computing leave ample room to rewrite the competitive future. “Technology builds on previous technology,” says Berkowitz. “Whether it's a year from now or two years from now or five years from now, we will see yet another breakthrough in technology.”

While regulation is a part of any major industry, there are arguments for potential risks. “AI is a global race, and you've got to be very careful,” says Grosso. “You may increase the competitive business environment in United States for about five or 10 years and see us flow into a backwater compared to our competitors outside the United States.” 

But US regulators aren’t the only ones examining the way AI companies are operating. Many countries have their own versions of antitrust laws with varying degrees of enforcement. “I would really expect all of the leading jurisdictions around the world to be wrestling with the same issues,” says Weber Waller.