Google investment in Anthropic to be investigated by CMA
Alphabet’s $2bn investment in UK AI startup to face probe by Competition and Markets Authority
Alphabet, the holding company for Google, faces an investigation by the UK’s Competition and Markets Authority (CMA) over its plan to invest up to $2 billion in AI start-up Anthropic.
The deal came after Anthropic signed an agreement with Google to host its Claude AI models in the Google Cloud. That deal obligated Anthropic to use Google’s suite of cloud computing services for Claude AI, its generative AI service, and is expected to net Google far more in revenues than the sum of its investment in Anthropic.
Claude AI also runs on Amazon Web Services (AWS).
The announcement of the investigation late last week [PDF] comes over year after the deal was revealed. The CMA invoked section 34 of the Enterprise Act 2002, which obliges companies engaged in mergers and acquisitions to provide information, “to enable it to begin an investigation for the purposes of deciding whether to make a reference for a phase 2 investigation”.
In other words, the CMA has demanded information about the deal as a preliminary to potentially opening an investigation. A response is expected by 19 December 2024.
While the deal between the two companies was first announced in October 2023, the CMA only expressed public interest in it on 30 July 2024, shortly after the election of the new government, with an invitation to comment opened to all interested parties.
However, the CMA’s interest in AI Foundation Models pre-dates the change of government. In April 2024, its CEO Sarah Cardell highlighted the challenges that might arise from the growing dominance of the market by a handful of major technology companies. The CMA even published a report in September 2023 over competition on the market.
The Alphabet investment in Anthropic involved $500 million upfront, with the commitment of a further $1.5 billion in the future, according to Bloomberg. It was structured in the form of a convertible note that would convert to equity at the next funding round and followed a similarly structured funding round from Amazon for up to $4 billion earlier in 2023.
Should Anthropic engage in a more conventional funding round, both Amazon’s and Google’s investments will be converted to equity, providing them with stakes in the company of 10 per cent or more.
Anthropic’s Claude AI is a GenAI service that competes directly against Google Gemini, Google’s catch-up AI service. Gemini was rushed to market in response to the sudden success of ChatGPT v4.0 and was considered so poor the company had to apologise.
Both Claude and Gemini are conventional AI chatbots, but Claude is capable of handling much larger file uploads – and, hence, more information – and is more versatile.
Moreover, Claude can translate basic text into computer commands enabling it to take control of a computer. At the same time, Anthropic claims that it has integrated various safety features to ensure that it cannot be misused, although observers suggest that it could potentially be ‘jail broken’.
A spokesperson for Anthropic said:
“We continue to cooperate with the CMA and provide them with the complete picture about Google’s investment and our commercial collaboration. We are an independent company and none of our strategic partnerships or investor relationships diminish the independence of our corporate governance or our freedom to partner with others. Anthropic’s independence is a core attribute - integral both to our public benefit mission and to serving our customers wherever and however they prefer to access Claude.”