The US Federal Trade Commission (FTC) has found that multi-billion-dollar deals between AI developers like OpenAI and cloud service providers such as Microsoft might stifle competition in the rapidly evolving AI sector. In a report released on January 17, the competition watchdog highlighted potential anti-competitive issues that arise from Microsoft, Amazon, and Google working with AI startups such as OpenAI and Anthropic. “As companies rapidly deploy generative AI technologies, enforcers and policymakers must stay vigilant to guard against business strategies that undermine open markets, opportunity, and innovation,” outgoing FTC chair Lina Khan said in a statement. “The FTC’s report sheds light on how partnerships by big tech firms can create lock-in, deprive start-ups of key AI inputs, and reveal sensitive information that can undermine fair competition,” she added. The report, stemming from FTC’s announcement in January last year, examines structural aspects of deals – such as equity, revenue-sharing rights, consultation, control, and exclusivity rights – inked between AI developers and cloud service providers. It also scrutinises the sharing of key resources and information between two partners, including access to large amounts of computing resources at discounted rates as well as integration of AI models into cloud provider’s products (for example, the Azure OpenAI service). What are the key findings? On the potential antitrust implications of these deals, the FTC report has found that that they could: - Impact access to computing resources and engineering talent - Make it more difficult for AI developer partners to change their cloud service provider or use multiple providers - Give cloud service providers access to sensitive data that may be unavailable to others, such as AI development methods, confidential chip co-design, customer usage, revenue numbers, etc. AI models developed by tech companies are hosted on servers by cloud service providers. OpenAI has an exclusive deal with Microsoft to host all of its AI models on the tech giant’s Azure servers. Cloud providers also help developers deploy AI models at scale with the help of graphics processing units (GPUs). They offer AI/ML data libraries and Application Programming Interface (API) capabilities as well. In response to the FTC report, Microsoft’s deputy general counsel Rima Alaily defended the company’s deal with OpenAI. “[The partnership] enabled one of the most successful AI startups in the world and spurred a wave of unprecedented technology investment and innovation in the industry,” she was quoted as saying by Bloomberg.
