Two companies that benefited the most from AI average, Nvidia and Microsoft, are the most exposed to antitrust investigations for AI monopolies. Regulatory authorities have shifted their approach, acting quickly against potential monopolistic practices instead of taking years to intervene.
Notable investigations include the US Department of Justice examining Nvidia’s alleged anticompetitive behaviour in the GPU market and the Federal Trade Commission (FTC) probing Microsoft’s $13 billion investment in OpenAI and strategic staff acquisitions from Inflection. The UK’s Competition and Markets Authority (CMA) is also investigating, particularly concerned about the over 90 partnerships tech giants have formed with large language model developers since 2019, potentially stifling competition.
Politically, there’s a risk that excessive intervention could be seen as stifling innovation, particularly in the face of global competitors like China. Regulators must balance fostering competition with enabling innovation, ensuring that the rise of generative AI, which promises significant technological upheaval, does not result in a market dominated by a few powerful players.
EU antitrust regulators scrutinise Microsoft’s partnership with OpenAI and Google’s AI deal with Samsung due to concerns over exclusivity clauses. Competition chief Margrethe Vestager plans to gather more third-party views. This development comes amid global unease about Big Tech’s dominance in new technologies.
After sending questionnaires to tech firms regarding their AI partnerships, Vestager now seeks additional information about Microsoft’s $13 billion investment in OpenAI’s for-profit subsidiary, which would result in a 49% stake, to determine if it harms competitors.
While Microsoft’s deal isn’t subject to EU merger rules, Vestager also investigates if Big Tech is blocking smaller AI developers from accessing users and businesses. Similar concerns apply to Google’s agreement to pre-install its Gemini Nano model on Samsung devices.
Vestager also examines ‘acqui-hires,’ where companies acquire others primarily for their talent, such as Microsoft’s $650-million acquisition of Inflection, to ensure these practices don’t bypass merger control rules and lead to market concentration.
Why does it matter?
Reuters reported in April that the EU regulators were building a case that could lead to an antitrust investigation into Microsoft’s $13 billion investment in OpenAI. Partnerships involving Alphabet, Amazon, and Anthropic are also under scrutiny from antitrust enforcers on both sides of the Atlantic.
In a decision issued on 28 June 2024, a US federal judge authorised most of the US Securities and Exchange Commission (SEC) lawsuit against leading cryptocurrency exchange Binance. The origin of the lawsuit can be traced back to June 2023, when the SEC alleged that Binance and its CEO, Zhao, had manipulated the market, misused customer funds, non-complied with US customer restrictions, and misrepresented investors on their market surveillance controls.
Binance was also accused of enabling trades of crypto tokens, which were classified as unregistered securities by the SEC. For Binance, this ruling compounds its challenges following its recent $4.2 billion settlement with the Department of Justice and the Commodity Futures Trading Commission over financial misconduct.
However, the verdict partially favours the cryptocurrency industry as the judge invoked a previous ruling, stating that the SEC failed to prove that secondary sales of Binance’s tokens (those sold by sellers other than Binance on exchanges) should be classified as securities.
Why does this matter?
The following case reflects a broader regulatory trend directed to major crypto firms, such as Coinbase, Kraken, and Consensys, in an attempt to increase oversight of the cryptocurrency sector.
The EU antitrust regulators have charged Meta Platforms with violating landmark tech rules through its new ‘pay or consent’ advertising model for Facebook and Instagram. The model, introduced last November, offers users a choice between a free, ad-supported service with tracking or a paid, ad-free service. The European Commission argues this binary choice breaches the Digital Markets Act (DMA) by forcing users to consent to data tracking without providing a less personalised but equivalent alternative.
Meta asserts that its model complies with a ruling from EU’s top court and is aligned with the DMA, expressing a willingness to engage with the Commission to resolve the issue. However, if found guilty, Meta could face fines of up to 10% of its global annual turnover. The Commission aims to conclude its investigation by March next year.
The charge follows a recent DMA-related charge against Apple for similar non-compliance, highlighting the EU’s efforts to regulate Big Tech and empower users to control their data.
The European Union has directed Chinese fast-fashion e-commerce giants Temu and Shein to disclose their compliance with EU online content regulations by July 12. This move follows complaints lodged by consumer groups and designates both platforms as Very Large Online Platforms under the Digital Services Act. These designations impose stricter obligations on handling illegal and harmful content.
According to the European Commission, requests for information have been issued to Temu and Shein regarding their measures to combat illegal products, prevent user deception through manipulative interfaces, and safeguard minors. The Commission also seeks transparency in their recommendation systems, traceability of sellers, and compliance integration into platform design.
The enforcement action stems from consumer organisations’ complaints and underscores the EU’s commitment to ensuring digital platforms uphold regulatory standards. Failure to comply with the Digital Services Act could lead to fines of up to 6% of a company’s global turnover, emphasising the seriousness with which the EU views adherence to online content rules.
Temu and Shein are mandated to furnish comprehensive responses by the specified deadline, marking a pivotal moment in how global e-commerce giants navigate regulatory landscapes beyond their home markets. The outcome of these disclosures will be closely monitored as the EU continues to assert its regulatory authority over digital platforms operating within its jurisdiction.
Regulating AI, a non-profit organisation dedicated to promoting AI governance, has announced its advisory board’s formation. Board members include notable figures such as former US Senator Cory Gardner, former Bolivian President Jorge Quiroga, and former Finnish Prime Minister Esko Aho. The board aims to foster a sustainable AI ecosystem that benefits humanity while addressing potential risks and ethical concerns.
The founder of Regulating AI, Sanjay Puri, expressed his excitement about the diverse expertise and perspectives the new board members bring. He emphasised the importance of their wisdom in navigating the complexities of the rapidly evolving AI landscape and shaping policies that balance innovation with ethical considerations and societal well-being.
One of the organisation’s key initiatives is developing a comprehensive AI governance framework. That includes promoting international cooperation, advocating for diverse voices, and exploring sector-specific AI implications. Former President of Bolivia Jorge Quiroga highlighted the transformational power of AI and the need for effective regulation that considers the unique challenges of developing nations.
Regulating AI aims to build public trust, align international standards, and empower various stakeholders through its board. Former US Senator Gardner underscored the necessity of robust regulatory frameworks to ensure AI is developed and deployed responsibly, protecting consumer privacy, preventing algorithmic bias, and upholding democratic values. The organisation also seeks to educate and raise awareness about AI regulations, fostering discussions among experts and policymakers to advance understanding and implementation.
Italy’s financial watchdog, Consob, has begun experimenting with AI to enhance its oversight capabilities, particularly in the initial review of listing prospectuses and the detection of insider trading. According to Consob, these AI algorithms aim to swiftly identify potential instances of insider trading, which traditionally requires significantly more time when conducted manually.
The agency reported that its AI algorithms can detect errors in just three seconds, a task typically taking a human analyst at least 20 minutes. These efforts were part of testing conducted last year using prototypes developed in collaboration with Scuola Normale Superiore University in Pisa, alongside an additional model developed independently.
Consob views the integration of AI as pivotal in enhancing the effectiveness of regulatory controls to detect financial misconduct. The next phase involves transitioning from prototype testing to fully incorporating AI into Consob’s regular operational procedures. That initiative mirrors similar efforts by financial regulators globally who are increasingly leveraging AI to bolster consumer protection and regulatory oversight.
For instance, in the United Kingdom, the Financial Conduct Authority (FCA) has utilised AI technologies to combat online scams and protect consumers. That trend underscores a broader international movement within regulatory bodies to harness AI’s potential in safeguarding market integrity and enhancing regulatory efficiency.
EU antitrust regulators have accused Microsoft of illegally bundling its Teams chat and video app with its Office product suite, claiming the company’s recent efforts to separate the two were insufficient. The European Commission stated that Microsoft breached antitrust rules by tying Teams to its popular Office 365 and Microsoft 365 suites, which stifled competition.
The regulatory action follows a 2020 complaint by Slack, a rival workspace messaging app owned by Salesforce. Microsoft introduced Teams to Office 365 in 2017 at no extra cost, replacing Skype for Business, and its use surged during the pandemic due to its video conferencing capabilities.
The European Commission has preliminarily determined that Microsoft’s changes don’t adequately address the competition concerns and that more actions are needed. Microsoft has expressed willingness to work with the EU regulators to find acceptable solutions.
PayPal has appointed Srini Venkatesan as its new Chief Technology Officer (CTO) to lead its artificial intelligence initiatives. Venkatesan will be in charge of areas such as AI and machine learning, information security, and product engineering. In his previous position at Walmart, Venkatesan developed platforms to support the retail giant, including aspects of the Walmart+ subscription service. He has also worked at Yahoo and eBay among others.
Why is this important?
Like others in the finance field, PayPal has sought to embrace AI to improve its services. In January, the company announced new AI-driven tools, including some to make payment checkouts smoother. However, other tools use buying history, instead of browsing history, to target clients.
‘Smart Receipts’ uses buying history to recommend products, cashback and other deals on receipts. Similarly, ‘Advanced Offers Platform’ uses AI to deliver targeted promotions based on the customer’s purchase history with any previous merchant. PayPal says it is shifting from general ads to personalised ‘offers’, improving the customer experience.
In an article in PayPal’s newsroom, the company said it is adding simple privacy controls to let customers choose whether to share their data with merchants for personalised offers. However, given that browsing targeted advertising has already caused privacy concerns, it is likely that buying history will do so too. Venkatesan will be expected to implement the tech and answer to these concerns in his new role.
TikTok will be sued again by the US Department of Justice (DoJ) in a consumer protection lawsuit against ByteDance’s TikTok later this year, focusing on alleged children’s privacy violations. The incentive for the legal move comes on behalf of the Federal Trade Commission (FTC), but the DoJ will not pursue allegations that TikTok misled US consumers about data security, specifically dropping claims that the company failed to inform users that China-based employees could access their personal and financial information.
The decision suggests that the primary focus will now be on how TikTok handles children’s privacy. The FTC had referred to the DoJ a complaint against TikTok and its parent, ByteDance, concerning potential violations of children’s privacy, stating that it investigated TikTok and found evidence suggesting they may be breaking the Children’s Online Privacy Protection Act. The federal act requires apps and websites aimed at kids to get parental consent before collecting personal information from children under 13.
Simultaneously, TikTok and ByteDance are challenging a US law that aims to ban the popular short video app in the United States starting from 19 January next year.
