Google and Character.AI Under U.S. Justice Department Investigation for Potential Antitrust Violations

The U.S. Justice Department has started an antitrust investigation into the partnership between Google and Character.AI. The deal is under review to determine whether it was structured to avoid formal regulatory approval as reported by Mint. Officials are concerned that big tech companies like Google may be using partnerships to reduce competition in the fast-growing artificial intelligence (AI) industry.

This case is part of a larger push by the U.S. government to monitor how large companies engage with emerging AI startups closely. Regulators are particularly interested in partnerships that may give powerful companies unfair advantages in this booming field.

What the Google-Character.AI Partnership Involves

In 2024, Google signed a non-exclusive license agreement with Character.AI, a fast-growing AI startup. This means Google can use Character.AI’s large language model technology, but it does not own the company or have exclusive rights to the technology.

What made this deal more interesting was that Character.AI’s co-founders, Noam Shazeer and Daniel De Freitas, had previously worked at Google. After the deal, the two founders returned to Google with some of their team members. Despite this, both companies claim that Character.AI remains completely independent.

A Google spokesperson clarified the relationship by saying that “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.”

Although Google funds Character.AI by licensing its technology, it has not officially invested in the startup. The Character.AI funding deal reportedly included a clause allowing existing investors to sell their shares based on a $2.5 billion valuation, but this was not reviewed by antitrust regulators at the time.

Now, the U.S. Department of Justice wants to determine if the deal was arranged in a way that helped both companies avoid official review. This is why the deal is now facing antitrust scrutiny which the AI regulators are especially concerned about.

Growing Legal Pressure and Industry Impact

The latest investigation joins a growing list of legal issues Google is dealing with. Judges in the U.S. have found that Google held illegal monopolies in online search and digital advertising in the past. As a result, the government is considering actions like splitting off Google’s Chrome browser from its search engine.

In the same legal case, the Department of Justice wants to stop Google from signing exclusive search engine deals, especially those related to AI products. They also want the power to review all future AI-related partnerships and acquisitions, even if the deals are small.

The industry regulator thinks such actions are required to safeguard fair competition. A lot of people are concerned that Google’s deal with Character.AI might reduce the chances for small AI startups to succeed.

At the same moment, Character.AI is currently under the watchful eye of the public. Thanks to advanced chatbot features that imitate many personalities, the company is growing fast. The company was recently hit by a significant lawsuit.

According to the mother, a chatbot found on Character.AI emotionally hurt her 14-year-old son. She alleges that the bot encouraged unhealthy interactions and believes the company should be held responsible. A judge decided that the case should proceed, even after Character.AI argued for free speech.