FTC Launches Inquiry into Generative AI Investments: What You need to Know

March 6, 2024
Authored by
Hande Yuksel Sen
Legal Research Intern at Holistic AI
FTC Launches Inquiry into Generative AI Investments: What You need to Know

The FTC is one of the most vocal federal agencies in the US seeking to regulate artificial intelligence, already having issued a number of statements, reports, and warnings for AI misuse. Previously launching an investigation into generative AI over competition concerns in June 2023, on 24 January 2024, the FTC issued orders to file a special report to tech industry leaders Alphabet, Inc., Amazon.com, Inc., Anthropic PBC, Microsoft Corp., and OpenAI, Inc. under section 6(b) of the Federal Trade Commission Act, which allows them to conduct studies providing insights into market trends and business practices.

The investigation into generative AI investments comes following concerns about how investments and partnerships formed by dominant companies may distort innovation and undermine fair competition. Indeed, Big Tech has significantly invested in generative AI companies, with Microsoft's investing $13 billion in OpenAI and Google and Amazon significantly investing in Anthropic.

The companies have 45 days to respond to the FTC’s order, meaning responses are due by the end of this week – 9 March 2024.

What information must companies provide in the special report?

Alphabet, Amazon,  Anthropic, Microsoft, and OpenAI are required to provide information from the period 1 January 2017 to the date of the resolution on the following:

  • All agreements, related documents, and rationale for the investment or partnership with other companies on generative AI.
  • The nature and extent of the interaction with and influence over partner companies, including information about regular meetings, personnel involved, and any governance or oversight rights.
  • Engagements and interactions concerning business operations and strategic decision-making.
  • All analyses, reports, studies, and surveys related to the impact of the transaction competition, market participants, and the company's market position across lines of business.
  • Documents related to exclusivity agreements, privileged access expectations, and any restrictions on partner companies.
  • Competitive conditions for cloud computing and generative AI products or services.
  • All materials, communications, and documents submitted to any government entity related to the transaction.

These documents must be provided in specified electronic formats, with metadata, attachments, and index. There must be translations for documents not in English, and documents in colour must be accompanied by an affidavit affirming their accuracy.

The entities must also provide a description of the use of software or technology, including search terms, predictive coding, or other methods, to identify or eliminate documents. If they are withholding material based on a claim of protected status, then a detailed log supporting this claim must also be provided.

Finally, the organizations must provide the FTC with contact for any queries that may arise and the passwords require for any documents or other platforms that form part of the response.

Strengthening the FTC’s position on generative AI

The investigation into these tech giants will provide the FTC with detailed information related to specific investments or partnerships, strategic rationales, practical implications, competitive impacts, and details related to competition for AI resources.

This unanimous 3-0 vote by the Commission to issue the orders and conduct the study signifies a concerted effort to delve into the relationships between generative AI developers and cloud service providers. The goal is to better understand the competitive landscape and potential implications of these collaborations, highlighting the FTC's commitment to ensuring fair competition and preventing any practices that could stifle innovation in the rapidly evolving AI sector.

This move by the FTC serves as a crucial step in safeguarding against tactics that could hinder the opportunities presented by generative AI technologies. As companies race to develop and monetize AI, the inquiry aims to prevent practices that may distort innovation, ensuring a level playing field for all participants in the dynamic AI market. The responses from the companies involved will play a pivotal role in shaping the regulatory landscape for AI partnerships and investments in the years to come.

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DISCLAIMER: This blog article is for informational purposes only. This blog article is not intended to, and does not, provide legal advice or a legal opinion. It is not a do-it-yourself guide to resolving legal issues or handling litigation. This blog article is not a substitute for experienced legal counsel and does not provide legal advice regarding any situation or employer.

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