Google Faces DOJ Antitrust Probe Over Character.AI Deal Amid Intensifying AI Scrutiny

DOJ Investigates Google’s Deal with Character.AI Over Antitrust Concerns

The U.S. Department of Justice (DOJ) is examining whether Alphabet's Google breached antitrust laws through its agreement with Character.AI, according to Bloomberg Law. The probe focuses on whether Google structured the deal to bypass formal government merger review.

Last year, Google entered a licensing agreement granting it a non-exclusive license to Character.AI’s large language model technology. Additionally, Google hired Character.AI co-founders Noam Shazeer and Daniel De Freitas, both former Google employees.

Regulatory Scrutiny on Tech Partnerships

Antitrust officials have expressed concerns about the nature of these deals, especially when tech giants acquire talent and technology without undergoing full merger scrutiny. Similar arrangements have attracted attention recently:

• Microsoft’s $650 million deal with Inflection AI in March 2024, involving model licensing and talent acquisition.
• Amazon’s hiring of AI firm Adept’s co-founders and team in June last year.

Both deals have faced regulatory examination, reflecting increasing concern over competitive practices amid the AI race.

Google’s Position and Ongoing Legal Challenges

A Google spokesperson stated, “We’re always happy to answer any questions from regulators. We’re excited that talent from Character.AI joined the company but we have no ownership stake and they remain a separate company.”

The DOJ has not commented publicly on the investigation. Character.AI also did not respond to requests for comment.

The DOJ’s authority extends to scrutinizing deals that may be anti-competitive, even if they avoid formal merger reviews. The current probe is in early stages and may not result in enforcement action.

Google is already under significant regulatory pressure. The DOJ seeks to dismantle Google’s dominance in online search and digital advertising through separate legal cases. Recently, the Federal Trade Commission supported a DOJ proposal requiring Google to share search data with competitors.

Implications for Legal Professionals

This investigation highlights the growing regulatory focus on how tech giants structure partnerships and acquisitions, especially involving AI startups. Legal professionals should monitor developments closely, as enforcement approaches may evolve to address novel deal structures that skirt traditional merger reviews.

Staying informed on antitrust trends related to AI and technology sectors will be essential for advising clients and managing compliance risks in this fast-changing environment.

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