(Reuters) – The $14.8 billion investment made by Facebook owner Meta (META.O) in Scale AI and the hiring of the CEO of the data-labeling business may test the Trump administration’s stance on so-called acquihire agreements, which have been lambasted by some as an attempt to circumvent regulatory scrutiny. It was Meta’s second-largest deal, which was revealed on Thursday. It grants Facebook’s owner a 49% nonvoting ownership in Scale AI, which labels data by hand using gig workers. Among its clients are Microsoft (MSFT.O), a rival of Meta, and OpenAI, the company that created ChatGPT. The agreement does not need to be reviewed by U.S. antitrust authorities, in contrast to an acquisition or transaction that would grant Meta a controlling interest. If they think the deal was set up to circumvent those standards or hurt competition, they could still investigate it. Though Reuters exclusively reported on Friday that Alphabet’s (GOOGL.O) Google has decided to sever ties with Scale in light of Meta’s stake, and other customers are looking at taking a step back, the deal seemed to be structured to avoid potential pitfalls, such as denying competitors access to Scale’s services or giving Meta an inside view of rivals’ operations. A Scale AI representative stated in a statement that the company’s business, which includes working with governments and other corporations, is still robust because it is dedicated to preserving consumer data. The business refused to discuss information with Google.
Two people with knowledge of the transaction said that Alexandr Wang, Scale’s 28-year-old CEO who is joining Meta as part of the agreement, will continue to serve on Scale’s board but will have the proper limitations placed on his access to information. William Kovacic, director of George Washington University’s competition law department, said big tech corporations probably think it is easier to negotiate the legal climate for AI partnerships under President Donald Trump than it was under former President Joe Biden. He noted that although Trump’s antitrust enforcers have stated that they do not wish to control the advancement of AI, they have also shown a lack of faith in major tech companies. An advertisement is currently playing in the video player. Using a mouse or computer, you can skip the advertisement in five seconds. That would make me believe that they will continue to closely examine the actions of the corporations. “It is not a requirement that they will act in a manner that would undermine the connections,” Kovacic stated. Investigations by the Federal Trade Commission into previous “aquihire” transactions seem to be at a halt. The FTC launched investigations into Microsoft’s $650 million agreement with Inflection AI and Amazon’s (AMZN.O) acquisition of top executives and researchers from AI company Adept during the Biden administration. The latter made it possible for Microsoft to employ the majority of Inflection’s employees, including its co-founders, and apply its models. According to a source with knowledge of the situation, Amazon’s deal finished without the regulator taking any more action.
Furthermore, despite a broader investigation into practices at the software behemoth, the FTC has yet to take enforcement action against Microsoft over Inflection more than a year after it launched its initial investigation. On Friday, an FTC representative declined to comment. Professor David Olson of Boston College Law School, who teaches antitrust law, said Meta was wise to take a minority nonvoting share. He added that the FTC might still want to examine the deal. “I think that does give them a lot of protection if someone comes after them,” he said. There are many who doubt the Meta bargain. Massachusetts Democrat and inquisitive U.S. Senator Elizabeth Warren said Meta’s investment should be closely examined. “Meta can refer to this agreement as it pleases, but if it is illegal because it stifles competition or facilitates Meta’s illegal dominance, antitrust authorities ought to look into it and stop it,” she said in a statement on Friday. Even though the FTC is suing Meta for monopoly, it is unclear if the agency will examine Meta’s stake in Scale. The U.S. Department of Justice’s antitrust division, overseen by former JD Vance counsel Gail Slater, recently started investigating into whether Google’s cooperation with chatbot maker Character.According to Bloomberg News, AI was created to avoid antitrust examination.