The Federal Trade Commission has issued orders to five major tech companies requesting information about business combinations and investments relating to generative artificial intelligence.

The orders — directed to Alphabet Inc., Amazon.com Inc., Anthropic PBC, Microsoft Corp., and OpenAI Inc. — asked about strategic partnerships, investments, and business combinations between AI developers (Open AI and Anthropic) and cloud service providers (Microsoft, Google and Amazon).

Generative AI uses artificial intelligence to generate text, images, code or other content from a prompt.

In a release, the FTC said it was targeting information in a number of areas, including the competitive impact of investments and business combinations, the implications at a practical level of such transactions, and the competitive landscape for AI resources.

While Thursday’s announcement did not describe in detail specific transactions or investments, the orders appeared to focus on Google’s reported investment of $2 billion in Anthropic — the creator of Claude 2, a chatbot that rivals Open AI’s ChatGPT — as well as the announced strategic partnership between Anthropic and Amazon. Microsoft’s widely reported investment — more than $10 billion — in OpenAI also appeared to be a central focus.

FTC digs for details

The commission issued the orders under its Section 6(b) power to require business entities to file “annual or special … reports or answers in writing to specific questions” to provide information about the entity’s “organization, business, conduct, practices, management, and relation to other corporations, partnerships, and individuals.”

The commission can use this approach to study markets for purpose of better understanding emerging trends and market dynamics.

The companies have 45 days to respond.

Alex Goranin, an intellectual property litigator at Duane Morris in Philadelphia, said the FTC orders were not a surprise.

Goranin, who edits a newsletter on legal developments in the world of AI, termed the orders a “cautious first step,” but said he thought that they were significant.

He said that over the last year the commission has made clear that it was closely watching the AI space, “but now they seem to have taken an additional step forward and are actually using their statutory authority and their process to begin these kinds of investigations.”

The FTC orders follow a number of actions at the federal level that indicate the Biden Administration’s interest in regulating the fast-developing arena of generative AI.

In May of 2023, Lina Khan, chair of the FTC, penned a guest essay in the New York Times titled, “We Must Regulate A.I. Here’s How” in which she compared the disruptions that AI will cause to the revolution brought on by Web 2.0.

She wrote that while companies like Facebook and Google revolutionized communications, their innovations “came at a steep cost,” as notionally free services “were monetized through extensive surveillance of the people and businesses that used them.”

Khan went on to say that public officials have a “a responsibility to ensure this hard-learned history doesn’t repeat itself.” She said that the FTC was taking a close look at how the development of AI technology can grow and succeed without “tolerating business models or practices involving the mass exploitation of their users.”

The ‘promise and peril’ of AI

On October 30, 2023, President Joe Biden issued an executive order that laid out a map for the federal government to put in place a structure for the regulation of the development and use of AI technology.

The order recognized that AI “holds extraordinary potential for both promise and peril.” While AI has the potential to solve difficult and urgent problems, “irresponsible use could exacerbate societal harms such as fraud, discrimination, bias, and disinformation; displace and disempower workers; stifle competition; and pose risks to national security,” it said.

In section 5.3 of the order, the FTC — an independent agency — was “encouraged to consider” using its authority to “ensure fair competition in the AI marketplace and to ensure that consumers and workers are protected from harms that may be enabled by the use of AI.”

Goranin said he does not expect that these orders are the end of the FTC’s process.

“It almost feels like a snowball that’s starting to pick up momentum,” he said.