The influence of big tech companies rises more and more over time. They have multi-billion dollar deals with AI development companies to get the latest and best technology possible. Now the Federal Trade Commission (FTC) wants to scrutinize these deals from Microsoft, Amazon, and Google and introduce regulations. So that the companies don’t gain an unfair advantage in the market. And Amazon already sees first consequences.
The scrutiny of the Federal Trade Commission
Recently the FTC focused on things like bringing antitrust laws against companies that bought other competitors to gain an unfair advantage in the market. The situation now is different though. Companies don’t buy competitors or start-ups, they rather invest in them and with that have almost full control over these start-ups.
The chair of the FTC, Lina Khan, said in a statement, “Out study will shed light on whether investments and partnerships pursues by dominant companies risk distorting innovation and undermining fair competition.”
This is the first effort the Federal Trade Commission made now to check whether these partnerships give companies an unfair advantage over the competition since gib companies often used these “partnerships” to get ahead of their opponents and that might harm the economy. To check and apply regulations, the FTC said it would ask Microsoft, OpenAI, Amazon, Google, and Anthropic to describe what influence they have over their partners. The agency also said the companies would have to provide internal document to check what if the statements are true.
Microsoft’s comments of the regulations from the FTC
In a statement, Rima Alaily, a top competition lawyer said that she “assumed a global A.I. leadership position because important American companies are working together” regarding the partnerships with companies like OpenAI. It also promotes “competition and accelerating innovation.” Alaily stated.
Brad Smith, the president of Microsoft said in a post on social media in December that his company “forged a partnership with OpenAI that has fostered more AI innovation and competition, while preserving independence for both companies.” and that the arrangement was “very different from an acquisition.
A spokesman from Google, Peter Schottenfels, also commented that he hoped that these studies “shine a bright light” on companies that are building AI tools and “have a long history of locking in customers”.
Microsoft invested $13 billion into the start-up for a 49% stake. Microsoft intentionally kept the share below 50% to avoid antitrust laws. That means the company does not have full control over the start-up but it is almost there. Amazon would invest up to $4 billion and Google already invested $2 billion into the AI start-up Anthropic.
Amazon faced issues with the decision from the Federal Trade Commission
The $1.4 billion dollar deal of Amazon with iRobot abandoned due to the regulations from the FTC. Due to that iRobot cut 31% of it’s workforce or 350 jobs and the CEO of Roomba, the parent company of iRobot, said he would not continue as CEO at the company. Amazon said that the proposed deal of $1.4 billion could not take place due to regulations especially in the European Union.
EU antitrust chief, Margrethe Vestager said in a statement that, “the acquisition of iRobot would have enabled Amazon to foreclose iRobot’s rivals by restricting or degrading access to Amazon stores.”
Amazon’s general council said that the company is ” disappointed that Amazon’s acquisition of iRobot could not proceed” and that they “believe in the future of consumer robotics in the home and have always been fans of iRobot’s products.”
The Massachusetts-based iRobot said that it expected a revenue of $891 million in 2023. That is a reduction of 25% or between $265 and $285 million. Under the agreement that the company had with Amazon, they will receive $94 million in termination fee. Amazon also faces a court battle with the FTC over accusations that Amazon uses illegal strategies to boost their profits. One of those strategies is apparently an algorithm that pushed prices by more than $1billion.
Meanwhile the share of iRobot fell 7.2% after the split with Amazon due to the FTC’s regulations in just one afternoon. The impact of the decisions could be much more impactful though and lead to an even more bearish share of iRobot. Amazon shares however rose by almost 1%.
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