The Federal Trade Commission (FTC) has raised significant antitrust concerns regarding Microsoft’s $13 billion investment in OpenAI, arguing that such partnerships risk consolidating power among a small group of dominant cloud service providers (CSPs).
In its latest report, the FTC also scrutinized similar partnerships between Amazon and Anthropic, as well as Google and Anthropic, highlighting how these relationships could undermine competition in the burgeoning artificial intelligence (AI) sector.
Related: Microsoft’s $13 Billion Investment in OpenAI Under EU Scrutiny for Competition Concerns
FTC Chair Lina Khan emphasized the stakes involved in regulating such partnerships, stating, “The partnerships provide CSP partners access to certain technical and business information that other CSPs and AI developers may not have, including information related to generative AI models, AI development methods, confidential chip co-design, partner finances, and customer usage and revenue numbers.”.
FTC's Office of Technology staff releases a report on AI partnerships and investments between the largest cloud service providers and major AI developers: https://t.co/FwVx3Ax8Fi /1
— FTC's Office of Technology (@TechFTC) January 17, 2025
Partnerships Creating Uneven Competitive Advantages
The FTC report outlines the mechanisms through which CSPs secure preferential access and exclusive advantages. For instance, Microsoft’s agreement with OpenAI mandates the exclusive use of Azure cloud services, while providing Microsoft with deep integration opportunities in AI infrastructure development.
Amazon and Google have similarly secured equity stakes and exclusivity clauses through their investments in Anthropic.
One particularly troubling practice, referred to as “circular spending,” involves CSPs requiring AI startups to reinvest a large share of their funding into the cloud provider’s services. This arrangement deepens the startups’ dependency on a single CSP, making it financially prohibitive to switch providers or establish multi-cloud setups.
Risks of Data Access and Proprietary Advantage
The report highlights concerns about CSPs leveraging their access to sensitive information, including financial metrics, customer behavior data, and AI model performance insights.
These insights enable CSPs to fine-tune their own competitive offerings, raising questions about market fairness. For example, some agreements include provisions allowing CSPs to use synthetic data generated by the startups’ AI models for training proprietary technologies.
Additionally, the joint development of AI-specific semiconductor chips, such as Microsoft’s Maia or Amazon’s Trainium, could further entrench the influence of CSPs. These chips, optimized for advanced AI tasks, remain inaccessible to smaller firms, limiting their ability to compete on equal footing.
Concentration of Talent and Computational Resources
The FTC warns that the scarcity of highly specialized AI engineers could worsen under current CSP-AI partnerships. Many agreements encourage or require startups to embed engineers within CSP teams, facilitating knowledge exchange but concentrating expertise within a few large organizations.
The report notes, “An open question is whether the partnerships may consolidate access to this talent pool in the hands of a limited number of firms”.
The reliance on CSPs for computational resources, including GPUs and proprietary AI chips, has already created bottlenecks for smaller players. As demand for AI hardware surges, the preferential access enjoyed by CSPs further diminishes opportunities for new entrants to scale effectively.
Implications for AI Innovation and Policy
The FTC identifies several potential long-term effects of these partnerships on the broader AI ecosystem. Exclusivity agreements, restrictive contracts, and barriers to interoperability threaten to stifle innovation by limiting competition. Moreover, CSPs’ ability to monopolize critical inputs, such as computational infrastructure and synthetic data, may exacerbate market inequities.
The report underscores the urgency for regulators to assess the full implications of these partnerships. FTC Chair Lina Khan noted, “As companies rapidly deploy generative AI technologies, enforcers and policymakers must stay vigilant to guard against business strategies that undermine open markets, opportunity, and innovation.”