US FTC has Big Tech on its Radar

The US Federal Trade Commission (FTC) has set its sights on the Big Tech as part of a new strategy of going after companies doing the most harm as against merely jacking up the number of cases that it brings forth. FTC chair Lina Khan said the move was kin to following the “mob bosses” rather than going after the henchmen. 

The FTC chair made these observations at a TechCrunch event (watch it here), barely a few  days after reports in The Wall Street Journal that the independent agency of the US government with a mission to enforce civil antitrust law and consumer protection, was bringing forth cases against Microsoft for its partnership with inflection AI. 

In the conversation with TechCrunch, Khan says “one thing that’s important is to make sure we’re actually look at where we can see the biggest harm. Where do we see players that are systematically driving these illegal behaviours? Being able to go after the ‘mob boss’ is going to be more effective than going after the henchman at the bottom,” she said. 

What’s interesting is that the commission isn’t sparing any company in this league. They’ve gone after Meta, Amazon, Google, and Apple over the past couple of years. This, according to Khan, is to ensure that the FTC is effective in its enforcement strategy. “If the FTC is successful, it can have a beneficial impact on the marketplace,” she notes. 

And what is FTC’s modus operandi here?

Khan says that the type of cases that they select need to be a deterrent to others. “Five or six or seven years ago, when you were thinking about a potential deal, antitrust risk, or even the antitrust analysis, was nowhere near the top of the conversation. And now, it is up front and center,” she notes. 

The FTC chair believes that as an enforcer it was their job to ensure that companies think of the legal issues up front as this also ensures that not too much public resources are spent taking on such deals. She told delegates at the “Strictly VC” event that the law only prohibits an exit or an acquisition that’s likely to fortify a monopoly or allow a dominant company to morph into a competitive threat. 

She noted that there are as many as 3,000 plus merger filings reported in the US each year but just about 2% of them get a second look by the government. So, one can safely assume that 98% of such deals are going through, she said adding that even for start-ups it would be good to have seven or eight potential suitors as it would promote competition as well as ensure that they get better valuations. 

On the prowl since 2023, FTC has reasons to hit now

Already,  FTC and the US Justice Department (DOJ) are set to proceed with antitrust probe against the two companies and OpenAI over how Microsoft structured a deal with the start-up Inflection AI to avoid scrutiny. Readers would recall that Microsoft had, in March, hired almost all of the latter’s staff and agreed to pay $650 million to license their technology. 

Meanwhile, the DOJ will probe Nvidia, which has not yet figured in any antitrust discussions. The issue at hand is the company’s dominance in making chips powering the AI boom as its H100 GPUs are facing huge demand that has pushed up the company’s valuation. Last year, French antitrust authorities had raided Nvidia offices in the country as part of their probe.

As for FTC, they got into the game after major investments were pumped into smaller AI start-ups by Big Tech companies in January this year. The agency wrote to Alphabet, Amazon, Anthropic, Microsoft and OpenAI about this move. In addition, they’re also probing OpenAI’s data collection methods to ascertain if it caused harm and spread falsehoods about people. 

India has a bunch of pending antitrust cases against some of these companies across various legal bodies. However, with the new government in position now, there needs to be some work done around framing new laws around how these companies access personal data and the purposes for which they use it.