Cutting-edge artificial intelligence (AI) models require huge amounts of capital investment in computing power, cloud storage, and other inputs for development and training. These technological investments and advances are occurring simultaneously with a significant focus on antitrust enforcement efforts.
As part of its effort to address the full range of AI policy issues, the Biden Administration touts the AI executive order (EO) as promoting "a fair, open, and competitive AI ecosystem." Indeed, the EO calls on agencies to promote competition in AI and discusses "stopping unlawful collusion and addressing risks from dominant firms' use of key assets," specifically mentioning the use of "semiconductors, computing power, cloud storage, and data to disadvantage competitors." The EO also encourages the Federal Trade Commission (FTC) to consider exercising its rulemaking authority to "ensure fair competition in the AI marketplace."
On the same day as the EO, the FTC provided comments to the U.S. Copyright Office, which identified "several issues raised by generative AI that implicate competition and consumer protection policy, as well as copyright policy[.]" Specifically, the FTC asserted that conduct that violates the copyright laws (such as certain types of infringement) may also constitute an unfair method of competition or an unfair or deceptive practice in violation of Section 5 of the FTC Act. The FTC also argued that conduct that does not necessarily violate the copyright laws may still violate Section 5 of the FTC Act, for example, by allowing large technology firms "to indemnify the users of their generative AI tools or obtain exclusive licenses to copyrighted (or otherwise proprietary) training data, potentially further entrenching the market power of these dominant firms."
Even before the EO, the FTC was already focused on enforcement in the AI space. FTC Chair Lina Khan recently emphasized that "there is no AI exemption to the laws on the books" and urged all enforcers and regulators to be "vigilant" in enforcing antitrust laws in the AI industry. FTC leadership and staff have already flagged potential antitrust risk areas in this space, including AI incumbent companies that might engage in "bundling and tying" of different product offerings, exclusive dealing or discriminatory behavior, or mergers and acquisitions to "consolidate market power" in the AI space, as well as the utilization of AI tools for collusive pricing behavior. The Department of Justice (DOJ), as well, has weighed in on the impact of AI for antitrust enforcement, noting that artificial intelligence, algorithms, and cloud computing may increase antitrust risk associated with certain business activities, such as information sharing and benchmarking.
The EO's focus on promoting a "fair, open, and competitive AI ecosystem" is consistent with the administration's broader focus on antitrust enforcement, especially in the technology sector. Although AI is at the cutting edge of developing technology, FTC and DOJ have both signaled that they will continue to look closely at both transactions and conduct that may impact competition in this space.
* Alejandra Uria contributed to this Advisory. Alejandra is a graduate of Yale Law School and is employed at Arnold & Porter's Washington, D.C. office. Alejandra is not admitted to the practice of law.
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