Microsoft’s AI deal under federal investigation | CNN Business

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CNN
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The Federal Trade Commission is investigating a recent Microsoft deal with artificial intelligence startup Inflection, according to a person familiar with the matter, as US antitrust regulators ramp up scrutiny of the red-hot AI industry.

The investigation comes as antitrust officials at the FTC and the Justice Department are nearing final agreement this week on how to jointly oversee AI giants such as Microsoft, Google, Nvidia, OpenAI and others, two people familiar with the matter told CNN.

That agreement, which is still being finalized, would appoint the Department of Justice as the lead investigator of Nvidia, while the FTC would take responsibility for investigating Microsoft and OpenAI, the people said. Any investigations would focus on whether the companies have used their dominant positions in the AI industry to harm competition.

The FTC probe into Microsoft, meanwhile, concerns whether the company’s investment in Inflection constituted an acquisition that Microsoft failed to disclose to the government, one of the people said.

In March, Microsoft announced it had hired Inflection’s co-founders and a number of its staff to lead its Copilot program, and Inflection said its AI model would be hosted on Microsoft’s cloud platform. As part of that deal, Microsoft was said to have paid $650 million to Inflection.

Microsoft, Inflection, Google, and OpenAI didn’t immediately respond to a request for comment. Nvidia declined to comment.

The US agencies’ division-of-labor agreement opens the door to more intensive probes of a sector that has energized investors, enthralled consumers and raised alarm bells among critics who say AI urgently needs regulation to forestall widespread job displacement, discrimination and fraud.

And it highlights how enforcers are increasingly trying to bring existing laws to bear on the industry as prospects for new US laws governing AI have dimmed. The United States is widely viewed as a laggard on AI regulation as others such as the European Union have leapfrogged it with tough rules about how the technology can be used in high-risk contexts.

This is a developing story. It will be updated.