Microsoft’s AI deal is being investigated by the German government

Washington
CNN
—

The Federal Trade Commission (FTC) is investigating a recent deal between Microsoft and AI startup Inflection, according to a person familiar with the matter, as U.S. antitrust regulators tighten scrutiny over the red-hot AI industry.

The investigation comes as antitrust regulators at the FTC and the Justice Department are nearing a final agreement this week on how to jointly oversee AI giants such as Microsoft, Google, Nvidia, OpenAI and others, two people familiar with the matter told CNN.

That agreement, which is still being drafted, would appoint the Justice Department as the lead investigator of Nvidia, while the FTC would take responsibility for investigating Microsoft and OpenAI, the people said. Any investigations would focus on whether the companies exploited their dominant positions in the AI ​​industry to harm competition.

The FTC’s investigation into Microsoft, meanwhile, is about whether the company’s investment in Inflection constituted an acquisition that Microsoft did not disclose to the government, one of the people said.

In March, Microsoft announced that it had hired the co-founders and some of its employees from Inflection to lead its copilot program. Inflection said its AI model would be hosted on Microsoft’s cloud platform. As part of that deal, Microsoft reportedly paid Inflection $650 million.

Microsoft, Inflection, Google and OpenAI did not immediately respond to a request for comment. Nvidia declined to comment.

The US authorities’ labor-sharing agreement opens the door to more intensive investigations into a sector that has excited investors, captivated consumers and raised alarm bells among critics, who say artificial intelligence urgently needs to be regulated to prevent job losses, discrimination and fraud.

And it shows how authorities are increasingly seeking to apply existing laws to the industry as the prospects for new U.S. laws on AI grow murkier. The U.S. is widely seen as a laggard in AI regulation, while other states such as the European Union have overtaken it with strict rules on the use of the technology in high-risk contexts.

This is a developing story and will be updated.