Google (GOOGL) Under Antitrust Scrutiny for Character.AI Deal

On Thursday, Bloomberg reported that the U.S. Department of Justice (DOJ) has initiated an antitrust investigation against Alphabet Inc.’s (NASDAQ:GOOGL) Google over its agreement with AI-driven chatbot company Character.AI.

The case relates to Google’s August 2024 non-exclusive licensing agreement with this chatbot company, which allowed Google to use the latter’s large language model technology. As part of the deal, founders Noam Shazeer and Daniel De Freitas, rejoined Google, along with some other research team members.  According to reports, Character.AI's existing investors’ shares were expected to be bought out at a price that valued the startup at around $2.5 billion. However, the company remains independent and operational.

As per current developments, the DOJ is investigating whether this deal structure helped Google bypass formal regulatory scrutiny for mergers. Similar deals are becoming more common in the AI space, and regulators worry that they might be used to stifle competition from other smaller and innovative companies. Thus, regulators scrutinize such cases more closely to root out potential anticompetitive practices.

For Google, this investigation adds to its antitrust challenges, including the recent actions related to its dominance in the online search and advertising technology markets. However, according to Bloomberg, the investigation is in the early stages and may not lead to enforcement action.

Alphabet Inc. (NASDAQ:GOOGL) is Google's parent company and a pioneer in Internet-related services and products, including online advertising technologies, search engines, cloud computing, software, and hardware.

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