FTC’s AI Probe Fails to Resolve Antitrust Enforcer Turf Tussles

The Federal Trade Commission was first to jump into the fray in probing competition issues in artificial intelligence, but the move is unlikely to give it a leg up over the Justice Department’s antitrust division on potential future litigation.

The two antitrust enforcement agencies are still ironing out who is best equipped to tackle AI competition issues, an FTC official said, as the impact of the nascent technology on the competitive landscape faces mounting scrutiny from regulators around the world. The FTC official spoke on background to provide more details about the agency’s thinking.

Current and former agency officials say the FTC’s inquiry last week into tech giants’ investments in AI startups could still allow the DOJ to claim jurisdiction over formal AI legal actions in the future.

Determining which agency is leading the charge is an important step toward formal legal action and gives companies more clarity on litigation procedures. Under the Biden administration, the two agencies have split oversight over the tech industry in general, with the DOJ taking on lawsuits targeting Alphabet Inc.’s Google and Microsoft Corp., while the FTC has gone after Meta Platforms Inc. and Amazon.com Inc.

The FTC’s study “doesn’t tell me anything about who’s going to investigate, as a law enforcement matter, any potential problems involving generative AI, and relationships between large companies and the authors of those products,” said Bill Baer, former head of the DOJ’s antitrust division and former FTC official.

A DOJ spokesperson declined to comment on AI jurisdiction discussions.

The FTC launched its AI inquiry by leveraging the agency’s 6(b) authority, which allows it to issue subpoenas to conduct market studies outside the context of specific litigation. The DOJ lacks a similar tool. In the past, the FTC has used information from its 6(b) inquiries to compile reports on issues such as tech giants’ acquisitions. It has at times made policy recommendations based on those reports, including related to pay-for-delay agreements among drug companies.

The two agencies can share information freely when it comes to civil matters, Baer said, meaning the FTC could disclose to its DOJ antitrust counterparts any insights gleaned from its 6(b) inquiry. It isn’t unusual for both agencies to want to look into a potential problem, added Baer, now a visiting fellow at the Brookings Institution.

The FTC official confirmed the agency is open to sharing the information it obtains through the inquiry, which focuses on investments by Microsoft, Amazon, and Google in AI startups Anthropic and OpenAI Inc.

FTC chair Lina Khan said at a public tech summit last week that the agency sees risks of consolidation and monopolization.

‘Makes the FTC Smarter’

The two agencies allocate matters through a so-called “clearance process.” Since the FTC’s 6(b) authority doesn’t constitute a law enforcement tool, it isn’t a determining factor in the clearance process for AI cases, agreed William Kovacic, a former FTC chair and current George Washington University law professor.

But the FTC’s study could bolster the agency’s arguments as to why it is best equipped to take the lead on any legal action stemming from the study, Kovacic said.

“In terms of substantive knowledge, this makes the FTC smarter,” Kovacic said, referring to information the agency might obtain about the effects of investments by large tech companies on the deployment and development of AI.

Kovacic called the clearance process a “bilateral negotiation.”

But the division of labor has on rare occasions given rise to disputes.

In the 1980s, when Kovacic was working as a junior attorney at the DOJ, he said the antitrust division went ahead and investigated a proposed merger between DuPont and Conoco, despite competing jurisdictional claims from the FTC and objections to the DOJ’s authority on the matter. This type of dispute is an outlier, Kovacic said, and is seen as “very bad behavior.”

Megan Gray, a former FTC attorney and the founder of GrayMatters Law & Policy, said the clearance process is often personality-driven, shaped by the relationship between the officials at the helm.

The Biden administration’s FTC and DOJ antitrust division, under the direction of Khan and Jonathan Kanter, respectively, have a track record of close collaborations on issues such as the agencies’ new merger guidelines.

“[The clearance process] is a lot more informal than you would expect,” Gray said. “It’s not like there’s a formula for how it’s done, and for high-profile things, it’s usually a negotiated deal between the highest people—so between Kahn and Kanter.”

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