Google's antitrust issues have resurfaced! The cooperation agreement with Character.AI is under review

Alphabet's subsidiary Google is facing an antitrust investigation by the U.S. Department of Justice regarding AI technology. On Thursday, media reports indicated that the U.S. Department of Justice is investigating whether Google violated antitrust laws due to its AI technology collaboration agreement with chatbot company Character.AI.

Antitrust enforcement officials have recently notified Google that they are reviewing whether its agreement with Character.AI was intentionally designed to evade the government's formal merger review process. In a deal reached with Google last year, the founder of Character.AI joined Google, while Google obtained a non-exclusive license to use the company's technology.

Deals like Google's are seen in Silicon Valley as an efficient way for companies to bring in the technical talent needed for new projects. However, this practice has also raised concerns among regulators, who worry that established large tech companies may use such means to suppress the competitiveness of emerging innovators.

Even if the relevant transaction does not require formal review, the U.S. Department of Justice can still assess whether it has anti-competitive characteristics. Currently, Google has not been accused of wrongdoing in this antitrust investigation, which is still in its early stages and may not ultimately lead to enforcement action.

Google spokesperson Peter Schottenfels stated in an email: "We are always happy to answer any questions from regulators. We are pleased that the talent from Character.AI has joined Google, but we do not hold any shares in the company, which remains an independent entity."

A spokesperson for the U.S. Department of Justice declined to comment. Representatives from Character.AI also did not respond to media requests for comments.

Character.AI is known for its chatbot that can simulate any character or entity. Its founders previously worked at Google and left a few years ago to start the company. After the deal with Google was reached last year, they returned to Google along with some members of their research team.

According to previous media reports, under the agreement with Google, Character.AI's existing investors will have their shares bought back at a price equivalent to a $2.5 billion valuation for the company. As part of the agreement, the startup signed a non-exclusive licensing agreement for large language model technology with Google. Meanwhile, Character.AI continues to operate as an independent company.

Google Faces Significant Antitrust Regulatory Pressure

As early as the Biden administration, U.S. enforcement agencies began examining competition issues in the rapidly evolving AI ecosystem, including the supply of specialized chips and computing resources. One key focus of the U.S. government is whether large tech companies gain unfair advantages in technological development through partnerships with AI startups.

Following a federal court ruling that Google engaged in illegal monopolistic behavior in the online search and advertising technology market, the U.S. Department of Justice's civil investigation is intensifying its antitrust scrutiny of Google.

In the online search case, the U.S. Department of Justice proposed forcing Google to divest its Chrome browser to restore competition in the search marketAs part of the case, the U.S. government also urged the judge to prohibit Google from paying for default settings for its search engine, including artificial intelligence products, and requested that law enforcement agencies have the authority to review any AI-related acquisitions by Google, even if these transactions do not meet the formal review threshold. A ruling in the case is expected this summer.

Google Soars and Then Retreats on Thursday

Google's stock price has fallen nearly 10% this year, significantly underperforming the broader U.S. stock market. On Thursday, Google's stock briefly rose nearly 5% during the trading session, but the gains were significantly narrowed, closing up nearly 1.4%. However, the performance that day still outperformed the broader U.S. stock market.

This week, Google held its 2025 Developer Conference. JP Morgan praised Google, stating that its AI technology is leading and far surpasses previous innovation speeds, with "AI reshaping search" already taking shape and monetization being considered. JP Morgan pointed out:

Google is releasing products at an unprecedented speed, and its full-stack AI strategy gives its foundational models advantages in efficiency and cost. Google's search engine AI Mode is the "biggest revolution since the invention of the search engine." Additionally, Google plans to commercialize AI technology through models like Gemini and Gemma