Google AI deal sparks DoJ investigation, reports say

The Justice Department is investigating Google‘s partnership with Character.AI, highlighting growing regulatory scrutiny over how tech giants structure AI deals to potentially bypass merger reviews. This probe adds to Google’s existing antitrust challenges, including cases targeting its search and digital advertising dominance, and follows similar regulatory attention on AI partnerships formed by Microsoft and Amazon as companies race to secure AI talent and technology.

The big picture: The DOJ is examining whether Google’s agreement with Character.AI violated antitrust law by potentially structuring the deal to avoid formal government merger review.

• Investigators are in the early stages of probing the 2023 licensing agreement that granted Google non-exclusive access to Character.AI’s large language model technology.
• The deal also involved Google hiring Character.AI’s co-founders Noam Shazeer and Daniel De Freitas, both former Google employees, without taking an ownership stake in the startup.

Why this matters: The investigation reflects increasing regulatory concern about how tech giants are acquiring AI capabilities without triggering traditional merger reviews.

• This represents a new front in antitrust enforcement as regulators look beyond conventional mergers and acquisitions to examine licensing deals and talent acquisitions in the AI sector.
• The probe comes as competition intensifies among tech companies racing to secure AI talent and technology.

Similar patterns: Google’s arrangement follows a trend of major tech companies striking deals with AI startups that transfer talent and technology without full acquisitions.

• Microsoft paid $650 million to Inflection AI in March 2024 to use its models and hire staff, a deal that also faced regulatory scrutiny.
• Amazon similarly hired AI firm Adept’s co-founders and team members in June 2023, attracting regulatory attention.

Google’s response: “We’re always happy to answer any questions from regulators,” a Google spokesperson said, emphasizing that Character.AI “remains a separate company” despite the talent acquisition.

Broader regulatory pressure: Google faces mounting antitrust challenges beyond this new investigation.

• The DOJ is pursuing two separate cases against Google—one targeting its search market dominance and another focused on its digital advertising technology.
• Earlier in May, the U.S. Federal Trade Commission endorsed the DOJ’s proposal to force Google to share search data with competitors.