FTC Opens Probe of Alphabet, Amazon, Microsoft AI Partnerships

The agency issued orders to five companies seeking information on their AI partnerships and investments. Using its Section 6(b) authority, the FTC sent compulsory orders to Alphabet, Amazon, Microsoft, OpenAI and Anthropic. The agency is seeking internal documents and communication related to three separate multi-billion-dollar deals: Microsoft-OpenAI, Amazon-Anthropic and Google-Anthropic.

Policymakers are at a critical moment where they must decide whether to enable open markets or allow a “handful of dominant firms [to] concentrate control over these key tools, locking us into a future of their choosing,” Khan said during a virtual FTC Tech Summit.

“It is reasonable to wonder whether these investments could lead to a heavily consolidated market dominated by only a few companies” with either no competitors or competitors hamstrung by their dependence on incumbents, said Commissioner Rebecca Kelly Slaughter. These agreements and investments are sometimes structured to avoid antitrust filing requirements, she said, but that doesn’t mean these companies aren’t violating competition laws. “I am confident that where there are facts that support enforcement investigation, our agency will pursue them,” she said. “If even a little of the hype around the power of AI models is to be believed, then it is emphatically our responsibility and obligation to support open and fair markets that prevent monopolies in their incipiency.”

What AI liability looks like remains an “open question,” but prior enforcement will inform how the agency approaches this work, said Khan. One thing it wants to make clear is that “some data is simply off the table for [AI] training models,” she said. Khan cited the agency’s recent order against Rite Aid banning the company from using facial recognition tools after “reckless” application of the technology led to “innocent people being accused of shoplifting.” She also cited the agency’s recent settlement banning data brokers from collecting sensitive location data (see 2401090081).

A competitive market will allow startups to reach customers and deliver products that beat the incumbents on the merits, said Commissioner Alvaro Bedoya.

Google said in a statement Thursday: “We hope the FTC’s study will shine a bright light on companies that don’t offer the openness of Google Cloud or have a long history of locking-in customers -- and who are bringing that same approach to AI services.”

"Partnerships between independent companies like Microsoft and OpenAI, as well as among many others, are promoting competition and accelerating innovation," Microsoft said in a statement. "We look forward to providing the FTC with the information it needs to complete its study." Amazon, OpenAI and Anthropic didn't comment.

The agency is seeking information on the companies’ “strategic rationale,” competitive analysis, findings on key AI products and services and information they have provided to foreign enforcers.

The U.K. Competition and Markets Authority is investigating its cloud computing market, which Amazon and Microsoft dominate. Ofcom recommended the inquiry. Evidence shows business customers have been struggling to switch from the two big providers due to fees associated with moving data, Ofcom Economics Director Tania Van den Brande said during a panel discussion at the summit.

“The war has already been lost” because the market has passed the point where companies can avoid the incumbents, said Duckbill Group Chief Cloud Economist Corey Quinn. Even if Amazon were barred from adding cloud customers, the company would continue to grow revenue for several quarters based on organic growth, he said: “Too big to fail passed the tipping point long ago.”

Amazon, Microsoft and Meta are starting to manufacture chips, which makes it even harder for semiconductor entrants to break into the market, said entrepreneur Dave Rauchwerk. “When they’re making their own chips, it gives them unparalleled access to surveil, a sort of innovation surveillance where they can see what their customers are doing and look into the memory inside of the chip itself,” he said. “They can figure out what needs to be made before it’s being made.”