Federal Trade Commission announces market inquiry between AI developers and cloud service providers

Federal Trade Commission Chairwoman Lina Khan announced Thursday that the agency will launch an inquiry into partnerships and investments made between artificial intelligence developers. 

During the FTC Tech Summit, Khan said that the FTC will focus on assessing if agreements between major cloud providers — such as  Amazon, Microsoft and others — are influencing the “competition across layers of the AI stack.” 

Khan said that the FTC will prioritize key principles of “how business models drive incentives” and “crafting remedies that address the underlying business incentives and establish bright line rules on the development use and management of AI inputs.” 

The commission, through its 6(b) authority — part of the FTC Act that empowers the agency to question a business’s “organization, business, conduct, practices, management and relation to other corporations, partnerships and individuals” — will conduct this inquiry into different providers and developers. 

Khan said during the event that the remedies the FTC will focus on include deleting AI models themselves along with unlawfully collected data. 

“The FTC’s work has made clear that these business incentives cannot justify violations of the law,” Khan said. “The drive to refine your algorithm cannot come at the expense of people’s privacy or security, and privileged access to customers’ data cannot be used to undermine competition. We similarly recognize the ways that consumer protection and competition enforcement are deeply connected with privacy violations fueling market power, and market power, in turn, enabling firms to violate consumer protection laws.”

Khan pointed to the commission’s recent order against Rite Aide that placed a five-year ban on the use of facial recognition tools after the AI-based technology incorrectly identified customers as those  who had previously shoplifted or individuals who had been identified previously as a “troublemaker.”

“Much is uncertain about what the precise future of this technology will look like, but the good news is we have the experience and expertise to meet the moment,” Khan said. “By continuing to sharpen our thinking and faithfully enforce the law, we can unleash AI’s potential benefits while safeguarding Americans from the potential harms.”