Rising M&A Activity in AI Space May Trigger Antitrust Concerns

By Madison Johnson, Esq. | Manager, Large Markets

Legislative activity surrounding the regulation of AI has begun to take greater shape this year, especially at the state level, and industry observers are bracing for an onslaught of new proposed legislation in 2025.

“Another wave of bills aimed at regulating artificial intelligence is expected from US states next year, and lawmakers are already trying to mitigate potential issues around interoperability and harmonization,” reported MLex, an investigative news service from LexisNexis.

These legislative initiatives are focused primarily on mitigating unintended bias in AI systems by protecting consumers from algorithmic discrimination in employment decisions and requiring greater transparency with the public, such as mandatory watermarking for AI-generated content.

But there may be a brewing confrontation in the works with regulators as well, with rising consolidation in the AI space potentially setting the stage for the emergence of antitrust enforcement, even given the obvious shift to a more business-friendly tone from the incoming Trump Administration.

Antitrust Scrutiny in AI Space

There has been a significant increase recently in the number of mergers and acquisitions involving companies in the Artificial Intelligence (AI) industry. The total number of AI-related M&A deals is expected to reach 326 in 2024, a 20% spike from the prior year, according to Aventis Advisors, and is projected to accelerate in 2025 as more private equity investors enter the space.

The U.S. Federal Trade Commission (FTC) has left no doubt in the last few years that the commissioners have set their sights on data privacy and AI as the technology has developed into such a core part of American commerce. MLex covered this emerging trend in 2023 and 2024, pointing to growing concerns about data privacy and consumer protections in a digital economy.

Corporate consolidation in the AI space may be the next area of focus for the FTC. Scott Schwartz and Kishan Barot, attorneys from Manatt Phelps & Phillips LLP, authored an insightful Expert Analysis column in Law360 that forecasts a number of key issues they anticipate will arise for AI companies and their acquirers in the year ahead. One of these potential areas is greater antitrust scrutiny.

“AI has captured the attention of lawmakers and regulators worldwide,” they write. “This spotlight will affect M&A deals in untold ways, but one aspect is immediately apparent: As strategic acquirers buy more and more companies in the AI space, the specter of entity use enforcement becomes unavoidable.”

They note, for example, that the FTC opened investigations in 2024 into three separate multibillion-dollar investments — Microsoft and OpenAI, Amazon and Anthropic, and Google and Anthropic — in which regulators promised to assess whether investments and partnerships pursued by dominant companies risk distorting innovation and undermining fair competition in the AI space.

Other examples include the U.S. Department of Justice investigation of Nvidia’s acquisition of the startup Run:ai on antitrust grounds, and a joint statement last summer from the FTC and European regulators on competition concerns attendant to the AI industry.

“In an attempt to avoid regulatory oversight, some large tech conglomerates have opted for a transaction structure that avoids the typical stock or asset acquisition by arranging an ‘acqui-license,’ whereby the AI technology is licensed — rather than sold — and the top employees at the AI startup are hired, leaving behind the target entity as primarily a licensor collecting royalties and avoiding a change-of-control of the target,” write Schwartz and Barot.

The authors conclude that “the federal government is closely monitoring M&A activity in the AI space, especially when the acquirer is a dominant technology company” and that legal professionals must assess antitrust risks accordingly.

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