FTC: Generative AI raises competition concerns

The FTC said in a blog post that its Bureau of Competition, working closely with the Office of Technology, is focused on ensuring open and fair competition, including at key inflection points as technologies develop. Generative AI represents one of these paradigm shifts. The FTC said “Accordingly, it is especially important that firms not engage in unfair methods of competition or other antitrust violations to squash competition and undermine the potential far-reaching benefits of this transformative technology. Unfair methods of competition can distort the rate and direction of innovation. By contrast, open and competitive markets can pave the way for emerging technologies, such as generative AI, to yield their maximum potential benefit.” The agency added “Some markets for specialized chips are-or could be, without appropriate competition policies and antitrust enforcement-highly concentrated. Last year a challenge by the FTC led to Nvidia (NVDA) abandoning its proposed $40B acquisition of Arm. The FTC’s complaint alleged that the merger would have stifled competition in multiple processor markets, including chips for cloud service providers. Today, increasing demand for server chips may outpace supply in some instances. There are reports, for example, that the spike in demand for server chips that can train AI has caused a shortage, prompting major cloud-server providers such as AWS (AMZN), Microsoft (MSFT), Google (GOOGL), and Oracle (ORCL) to ‘limit their availability for customers.’ And firms in highly concentrated markets are more prone to engage in unfair methods of competitions or other antitrust law violations.” It concluded that “As competition issues surrounding generative AI continue to develop, the Bureau of Competition, working closely with the Office of Technology, will use our full range of tools to identify and address unfair methods of competition.”