The relationship between major tech companies and federal regulators has been strained in recent years, with both political parties seeking to curb their power and influence. Google, currently battling a court ruling declaring its search dominance an illegal monopoly, is now appealing to regulators, alleging anti-competitive practices by Microsoft. This highlights the complex interplay of competition and regulation in the tech industry.
Google has reportedly contacted the Federal Trade Commission (FTC), urging them to investigate Microsoft’s exclusive cloud hosting agreement with OpenAI, the creator of ChatGPT. Google argues that this deal stifles competition and could inflate costs for developers utilizing ChatGPT APIs. This move is particularly interesting given Google’s own ongoing legal battles regarding antitrust concerns.
The Information first broke the news of Google’s appeal to the FTC. Microsoft’s $13 billion investment in OpenAI secured access to cutting-edge AI models and exclusive cloud hosting rights via Azure. This arrangement, often termed “round-tripping,” sees Microsoft’s investment ultimately returning to its coffers through Azure revenue. Beyond hosting, Microsoft receives 75% of OpenAI’s profits until recouping its investment, retaining its equity stake afterward.
This situation coincides with an ongoing FTC investigation into Microsoft’s cloud hosting contracts. The agency is examining allegations that Microsoft charges higher fees for services like Office 365 when clients use alternative hosting providers like Google Cloud. Given the widespread use of Microsoft software in businesses, requiring Azure for ChatGPT access could significantly hinder competition among cloud providers. Google, naturally, would likely welcome the opportunity to bid for ChatGPT hosting.
U.S. law prohibits practices aimed at establishing monopolies and harming competition and consumer welfare. The Clayton Act of 1914 specifically forbids tying arrangements where exclusive contracts force customers to purchase one product to access another, if this lessens competition.
Recent years have seen tech companies defend against antitrust actions by highlighting the free or convenient nature of their services, arguing no harm to consumer welfare. However, the current administration has adopted a different perspective. In the case of Amazon, FTC Chair Lina Khan argued that even with low prices, Amazon’s practices, such as requiring sellers to offer their best prices on its platform, have stifled e-commerce competition.
Google itself faces scrutiny over its exclusive agreement with Apple, paying billions annually to be the default search engine in Safari. Smaller competitors, like DuckDuckGo, argue this hinders competition, as most users don’t typically change their default search engine.
There’s speculation in Silicon Valley about a more laissez-faire approach to tech regulation under the new administration. However, it’s uncertain whether intervention in antitrust cases like Google’s will occur. Concerns about Big Tech bias and market dominance persist, recalling the initial antitrust lawsuit against Google filed during the previous administration.
In conclusion, Google’s request to the FTC regarding Microsoft’s OpenAI deal highlights the complexities of competition and regulation in the tech landscape. This ongoing situation underscores the need for careful scrutiny of exclusive agreements and their potential impact on the market and consumers. It will be crucial to observe how the FTC responds and how this case influences the evolving relationship between tech giants and regulatory bodies.
