The race to dominate artificial intelligence has led tech giants to open their checkbooks, pouring billions into startups like OpenAI and Anthropic in hopes of gaining an edge. Now federal regulators want to know whether these investments undermine competition.

The Federal Trade Commission said Thursday it has opened an inquiry into partnerships between AI startups and Amazon, Alphabet Inc.’s Google and Microsoft Corp. The agency sent detailed requests for information to the companies and warned that their deals could distort markets, accelerate consolidation and leave consumers with fewer choices.

“As companies race to develop and monetize AI, we must guard against tactics that foreclose this opportunity,” said FTC Chair Lina Khan.

At issue are multibillion-dollar investments the tech giants have made into OpenAI, the startup behind the viral sensation ChatGPT, and competitors working to commercialize similar technology.

Microsoft Corp. has poured billions of dollars into OpenAI and secured exclusive rights to key technologies. Amazon Inc. led a $4 billion investment into Anthropic, another AI startup, last year. And Alphabet Inc.’s Google has backed several firms working in the red-hot field of generative AI.

The funding has accelerated the development of artificial intelligence that can generate original text, images and computer code. But it has also raised concerns that dominant tech platforms may capture promising startups before they become standalone competitors.

“The US has assumed a global AI leadership position because important American companies are working together,” said Microsoft spokesperson Rima Alaily. “Partnerships between independent companies like Microsoft and OpenAI, as well as among many others, are promoting competition and accelerating innovation.”

FTC raises questions

In letters to Microsoft, Google, Amazon, OpenAI and Anthropic, the FTC requested copies of investment agreements, information about board seats and details about whether the tech giants have rights to preview or approve new AI-powered offerings before they are released.

The agency also asked if the startups have restrictions on providing data or technology to other companies. And it probed whether the tech giant’s cloud infrastructure offers the AI firms discounted rates or early access to cutting-edge chips and computing power.

Regulators asked for responses within 45 days and said additional requests could follow. The inquiry falls under the FTC’s study resolution powers, meaning the agency can collect industry data for research purposes but lacks the authority to issue fines or sanctions.

Still, the requests signal intense interest from the FTC as it pursues a broader investigation into possible anticompetitive conduct across the tech sector.

The issue has also captured attention in Congress, where lawmakers have proposed requiring tech platforms to share computer systems and data with rivals. They argue that could foster more competition in fields like search, social media and e-commerce.

Emerging rivalry

Microsoft and OpenAI’s close relationship has drawn particular scrutiny. The software giant is OpenAI’s largest outside investor, having committed around $10 billion, and has integrated the startup’s technology into products.

But after unveiling its new ChatGPT chatbot in November, OpenAI kept some of its latest research private from Microsoft for competitive reasons, people familiar with the decision told The Wall Street Journal.

Microsoft is racing to catch up with a competing chatbot of its own, even as OpenAI pitches ChatGPT to outside companies. Both firms aim to sell AI services to other businesses.

The surprise decision by OpenAI to launch chatbot features without informing Microsoft first hints at the emerging rivalry between the partners at the center of the FTC inquiry.

Regulators will likely explore whether Microsoft’s influence over OpenAI’s board and early access to its tech poses conflicts as the startups’ offerings enter the marketplace.

A Microsoft spokesperson said the company looks forward to providing information about its AI partnerships to the FTC. OpenAI, Amazon and Google.

Anthropic CEO Dario Amodei said his startup aims to be transparent and welcomed interest in AI safety.

The FTC’s industrywide study comes as the agency pursues an antitrust lawsuit against Meta Platform Inc.’s Facebook, alleging the company employed a strategy to squash emerging rivals by acquiring companies like Instagram and WhatsApp.

A federal judge recently dismissed that complaint but allowed the FTC to refile the case.