Republicans have lashed out at Federal Trade Commission Chairman Lina Khan for cracking down on U.S. tech companies, while regulators have expanded their probes to include artificial intelligence developers. Former FTC Commissioner Noah Joshua Phillips commented on the FTC’s investigation into OpenAI over allegations of violations of consumer protection laws by its ChatGPT AI service. FTC regulators are investigating these accusations amid concerns about antitrust violations in the technology sector.
video transcript
Julie Hyman: The Federal Trade Commission is investigating OpenAI over accusations that OpenAI’s AI chatbot, ChatGPT, is endangering personal reputations and data. The investigation is the most concrete action yet taken by regulators to crack down on the amorphous AI landscape.
FTC Chairman Rina Khan has long pushed for AI regulation through consumer protection regulations. Khan’s strategy for tech regulation has been aggressive, and recently her antitrust efforts to dismantle acquisitions by tech giants such as Meta and Microsoft have drawn backlash from Republican lawmakers.
Yesterday, a House committee accused Khan of bullying and politicizing a lawsuit against a big company. Khan argued that more regulation is needed to counter the growing concentration of power in big tech. Former FTC Commissioner Noah Joshua Phillips will be joining us to discuss this further.
So, Noah, let’s take a look at the current state of technology and focus specifically on AI here. What do you think the role of the FTC should be in observing the development of AI?
Noah Joshua Phillips: So, Julie, let me start by thanking you for having me. It’s great to be here with you. The FTC has fairly broad powers. They have the authority to consider competition issues, antitrust issues, and even consumer protection. And under the consumer protection rubric, they’re looking at different kinds.
we talk about deception. We talk about injustice. But more specifically, we’re also looking at things like privacy and data security, how companies make claims about what they do, and whether those claims are substantiated. And what we’re seeing here today is that government agencies are leveraging these tools to explore the economics of AI, and that’s what they’re interested in. very clear.
From last year’s report to Congress on AI to recent joint statements with the Department of Justice, the EEOC, and the CFPB, we’ve seen many statements about the FTC’s interest in giving AI a careful look.
– So what are they looking for?
Noah Joshua Phillips: While this research looks at a number of specifics, what is important is how companies are using their models, how they are training their models, and how they assess the risks associated with those models. It means that you are interested in what you are evaluating. Also consider privacy and data security.
Julie Hyman: What do you think about all this unfolding? What do you think it is? But what do you think is the biggest risk the FTC should address going forward?
Noah Joshua Phillips: Because of yesterday’s leaked report, what we have in front of us is a so-called civil investigation request. This is the beginning of the process and gives us a little bit of what they’re into. And again, they seem very interested in the models companies use and how they think about the risks associated with claims. It provides privacy and data security.
As you know, AI is a type of software that is now ubiquitous in the business world and people use it in many ways. And it creates many possibilities. It has the ability to greatly enhance many of the processes companies use and allow us all to learn, but it also comes with some risks.
And I think the authorities have been very vocal about it being an interest in policing.
– What happened to some of the AI deals that have taken place, especially M&A and slow acquisitions of companies for equity – what has changed between when you were FTC Commissioner and now, and the ongoing debate? But what has changed? At this point, do you think they are evaluating each of these different strategies that large mega-cap tech companies are doing?
Noah Joshua Phillips: of course. As a result, we haven’t seen much AI-related M&A activity in recent months. The biggest AI-related execution on some level, when I was on the board, was the NVIDIA Arm deal. Of course, NVIDIA’s chips power many of the very powerful processes for processing data that apply to games, but also, critically, to AI. And he was concerned that in terms of chip design, merging NVIDIA and Arm would be a problem for competition in the market, the agency said in the deal.
But we haven’t seen this played out in a competitive context much. The agency said it was concerned about some of the potential risks AI could pose to competitors. Could you please allow the algorithm to correct the price or something like that.
But what we saw yesterday, and what the authorities have been discussing so often, is actually the consumer protection side of the ledger, which has little to do with M&A and is more important than competition issues. .
Julie Hyman: That’s what they discussed yesterday, of course, the FTC, in general, may say the word anti-big technology is too strong, but it certainly wants to be proactive about big technology and big technology. thinking about. If I remember correctly, you are on the other side of things now.
You are working with a client who wants to make a merger happen. From their point of view and yours, is this an accurate portrayal of the FTC, and do you think it’s appropriate for the FTC to come under such attack?
Noah Joshua Phillips: Well, I think what we’re seeing is more activity from agencies, or at least more talk about activism. This is also reflected in regulations. That’s reflected in recent proposals to allow more information to be sought in the M&A process. However, it is not limited to big tech companies.
Indeed, across the economy, there is a lot of activity coming from government agencies.
– OK, so how does it show up when a deal comes to the table but doesn’t close because of fears of giving a company too much power in the future? Perhaps as a future financial consideration?
Noah Joshua Phillips: for the government? I think the view expressed by government agencies is that antitrust laws are not being sufficiently enforced. I doubt it’s accurate, but that’s their view.
And their view is that more of this kind of coercion helps economic growth. As a historical matter, I don’t think it’s necessarily backed up.
