DOJ, FTC Entangled in Jurisdiction Dispute Over Microsoft’s Open AI partnership

The Department of Justice (DOJ) and the Federal Trade Commission (FTC) find themselves in a bureaucratic tussle over the authority to investigate OpenAI and its collaboration with Microsoft.

With everyone talking about the commotion on OpenAI, newly reinstated co-founder Greg Brockman announced that ChatGPT Voice will be free to all users.

Entangled in Jurisdiction Dispute

Discussions between the Department of Justice (DOJ) and the Federal Trade Commission (FTC) have been ongoing for several months to determine which entity is best suited to scrutinize OpenAI, particularly the creators of ChatGPT, on antitrust grounds.

The Verge reported that FTC initiated conversations with the DOJ months ago, attempting to reach an agreement on the jurisdiction for reviewing the matter.

However, neither agency is currently willing to concede jurisdiction, leading to a deadlock that must be resolved before the government can formally intervene. This dispute adds complexity to one of the most prominent and contentious tech partnerships in recent years.

Microsoft has been investing billions of dollars in OpenAI for several years. As OpenAI develops its technology, Microsoft utilizes its vast computing resources, including its Bing search engine, to integrate OpenAI's services. As technology advances, the agencies must resolve the issue quickly.

Discussions primarily revolve around Microsoft and OpenAI and do not encompass a broader conversation about which agency should address AI issues.

However, a separate interagency debate has emerged more recently, focusing on determining the appropriate authority to investigate these companies for their alleged illegal content scraping practices used for AI training.

How Did It Start?

Under normal circumstances, companies are required to report most deals for review by federal antitrust regulators. Surprisingly, Microsoft and OpenAI did not follow this protocol. Microsoft asserts that it does not exert control over OpenAI, as it is a for-profit entity governed by a nonprofit organization.

Nevertheless, doubts have arisen regarding this lack of control, especially after Microsoft's involvement in the rehiring of OpenAI CEO Sam Altman shortly after his dismissal late last year. Both agencies are closely observing the situation surrounding Altman and Microsoft's role.

As per Reuters, the regulators are particularly concerned about whether this partnership grants an unfair advantage to both companies in the rapidly evolving AI market, specifically concerning the technology used for large language models.

While there is no specific law that prohibits both agencies from conducting simultaneous investigations into the same matter, they have traditionally avoided doing so to maintain a sense of cooperation.

Politico reported that this issue was brought to the forefront in 2019 when the then-chair of the FTC Joseph Simons, and the former antitrust chief of DOJ Makan Delrahim, reached a handshake agreement.

The understanding was that the FTC would pursue monopolization investigations concerning Meta (previously known as Facebook) and Amazon, while the DOJ would handle inquiries into Google and Apple. After approximately a year of negotiations, this agreement was established.

However, the DOJ later decided to investigate Meta (Facebook) independently, causing some tension between the two agencies, according to sources familiar with the matter. Nevertheless, this dispute was short-lived, as the DOJ eventually conceded to the FTC's jurisdiction.

The current FTC spokesperson, Douglas Farrar, highlighted the collaborative approach under the leadership of Lina Khan, stating that the FTC and the DOJ's antitrust head, Jonathan Kanter, work harmoniously to enforce antitrust laws.

Farrar emphasized that their joint clearance process is smooth, allowing both agencies to effectively utilize their resources in protecting American consumers from higher prices and unfair competition.