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U.S. DOJ Probes Google Over Licensing Deal with Character.AI

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The U.S. Department of Justice is investigating whether Google’s licensing deal with AI startup Character.AI violated antitrust laws, according to a report by Bloomberg Law. The probe focuses on whether the deal was deliberately structured to sidestep formal merger review processes.

Key Points:

  • Nature of the Deal: In 2023, Google secured a non-exclusive license to Character.AI’s large language model (LLM) technology and subsequently hired the company’s co-founders, Noam Shazeer and Daniel De Freitas—both former Google engineers.

  • Regulatory Concern: Antitrust officials are questioning if this agreement—despite not involving an acquisition—effectively gave Google undue influence or control over Character.AI’s technology, potentially undermining market competition in the fast-growing generative AI sector.

  • Google’s Response: A spokesperson stated that Google has no ownership stake in Character.AI and that the company remains independent. “We’re always happy to answer any questions from regulators,” the spokesperson said.

  • Ongoing Scrutiny: The probe is at an early stage and may not result in formal action, but it signals heightened regulatory vigilance over AI partnerships. The DOJ can still act if the deal is deemed anti-competitive, even without triggering a formal merger review.

  • Industry Trend: Similar AI talent and technology acquisition strategies have been employed by:

    • Microsoft, which paid $650 million to license Inflection AI’s models and onboard its team.

    • Amazon, which hired Adept’s co-founders and staff in 2023.
      Both deals have also drawn regulatory interest.

  • Broader Context: Google is already facing two major antitrust lawsuits from the DOJ targeting its dominance in search and digital advertising. Earlier this month, the Federal Trade Commission (FTC) supported a proposal requiring Google to share its search data with rivals.

Strategic Implications:

The inquiry reflects regulators’ growing concern that Big Tech may be circumventing antitrust oversight through creative structuring of AI-related partnerships. As companies compete to lead in generative AI, expect increased scrutiny on licensing, hiring, and technology transfer deals that could entrench market power.

Microsoft Wins Appeal Against FTC Challenge to $69 Billion Activision Deal

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Microsoft has secured a major legal victory as the 9th U.S. Circuit Court of Appeals rejected the Federal Trade Commission’s (FTC) bid to revive its antitrust challenge against the tech giant’s $69 billion acquisition of Activision Blizzard, maker of the Call of Duty franchise.

Key Points:

  • Unanimous Ruling: A three-judge panel upheld a lower court decision that denied the FTC’s request for a preliminary injunction. The court found that the FTC failed to demonstrate that the deal would likely harm competition.

  • Deal Closed in 2023: Microsoft finalized the largest-ever gaming acquisition after gaining approvals from regulators including UK authorities, despite scrutiny in multiple global jurisdictions.

  • FTC’s Position: The FTC argued the acquisition would undermine competition in console gaming, subscription services, and cloud gaming, but both the district court and appeals court found these claims lacked sufficient evidence.

  • Impact on FTC Strategy: The ruling is a blow to the FTC’s broader push under President Joe Biden’s administration to ramp up antitrust enforcement in Big Tech. The FTC’s internal administrative proceedings, paused since 2023, remain uncertain.

  • Microsoft’s Next Steps: While Microsoft has not yet commented, the ruling removes a significant legal obstacle and further solidifies its control over Activision’s gaming titles and intellectual property.

Judge Jacqueline Scott Corley had already ruled in 2023 that the acquisition would not “substantially lessen competition,” a standard the appellate court agreed had been correctly applied.

FTC Files Lawsuit Against Uber Over Alleged ‘Deceptive’ Subscription Enrollments

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Uber Technologies is facing a lawsuit filed by the U.S. Federal Trade Commission (FTC), accusing the company of engaging in “deceptive billing and cancellation practices” with its Uber One subscription service. According to the FTC, Uber misled consumers into signing up for its premium service without their consent and made it unreasonably difficult for them to cancel. The commission claims that users were subjected to a complex and burdensome process when attempting to cancel, requiring them to navigate as many as 23 screens and complete up to 32 actions to end their subscriptions.

In its complaint, filed on Monday, the FTC alleges that Uber charged consumers for Uber One without their explicit approval, and that the company misrepresented the savings and benefits associated with the program. The regulatory body’s investigation into these practices has intensified concerns over the clarity and transparency of subscription-based services, with Uber now facing scrutiny over its business model. This legal battle comes on the heels of a broader push by the FTC to crack down on subscription traps that make it difficult for consumers to cancel services they no longer want.

Following the announcement of the lawsuit, Uber’s stock saw a significant decline, dropping as much as 5.3 percent in New York, signaling investor concern over the potential consequences of the legal action. As of 2:15 p.m. on the same day, Uber’s shares were down 4.5 percent to $71.84. In response to the FTC’s claims, Uber has denied the allegations, asserting that it does not sign up or charge users without their consent. The company maintains that the cancellation process for Uber One now takes most users only 20 seconds or less, calling the FTC’s actions misguided.

The lawsuit is part of the FTC’s ongoing effort to protect consumers from deceptive business practices, particularly in the subscription sector. Recently, the agency has filed similar cases against major companies, including Amazon and Adobe, for allegedly making it overly complicated for consumers to cancel unwanted subscriptions. As the case moves forward, Uber remains confident that the court will find its sign-up and cancellation processes to be clear, simple, and in compliance with the law.