The United States Justice Department has launched a preliminary investigation into whether Google violated antitrust laws through a partnership with artificial intelligence startup Character.AI, reported Bloomberg citing sources.
Authorities are reportedly examining whether the deal was deliberately structured to bypass formal regulatory scrutiny typically associated with mergers or acquisitions. Though no official charges have been filed, the inquiry highlights growing concern among regulators that major technology firms may be leveraging such partnerships to suppress emerging competition in the fast-moving AI sector.
Google and Character.AI’s deal
Under the agreement, Google secured a non-exclusive licence to use Character.AI’s large language model technology. Additionally, the founders of the startup, who previously worked at Google, rejoined the tech giant last year, accompanied by some members of their research team. Despite this, Character.AI remains an independent company, and Google has no ownership stake, a company spokesperson confirmed.
Peter Schottenfels, a spokesperson for Google, stated in an emailed response, “We’re excited that talent from Character.AI has joined the company but we have no ownership stake and they remain a separate company. We’re always happy to answer any questions from regulators.”
The Justice Department’s investigation reflects a broader strategy adopted during the Biden administration to intensify scrutiny of potential anti-competitive behaviour across the burgeoning AI ecosystem. This includes analysing partnerships involving advanced computing infrastructure and AI models, where established tech firms may be using their financial power to gain disproportionate advantages.
Bloomberg previously reported that the deal included a provision allowing existing Character.AI investors to sell their shares at a valuation pegged at approximately $2.5 billion. While the transaction was not subject to a formal antitrust review at the time, investigators are now exploring whether such arrangements could be anticompetitive in nature.
Google Antitrust trial
The civil inquiry comes amid heightened legal pressures on Google, which has already been found by US courts to have maintained unlawful monopolies in both the online search and digital advertising markets. In one of the ongoing legal battles, the Justice Department has proposed remedies that could include separating Google’s Chrome browser business from its search operations.
In that same case, regulators are also seeking judicial approval to bar Google from striking default search engine agreements, particularly those tied to AI products and to grant antitrust enforcers the power to review all future AI-related acquisitions or collaborations, regardless of their size.
Character.AI, known for its ability to generate chatbots that can emulate virtually any persona or concept, has grown rapidly in popularity. The startup’s technology has been lauded for its versatility but also sits at the centre of regulatory debates about data use, competition, and ethical AI deployment.
While it remains uncertain whether the current probe will lead to enforcement action, it signals a clear intent by regulators to stay ahead of potential monopolistic practices in AI.
(With inputs from Bloomberg)
