Senator calls out Big Tech’s new approach to poaching talent, products from smaller AI startups

In the race to stay ahead in artificial intelligence, the largest tech companies are gobbling up the talent and products of innovative AI startups without formally acquiring them.

San Francisco-based Adept announced a deal late last month that will send its CEO and key employees to Amazon and give the e-commerce giant a license to Adept’s AI systems and data sets.

Some call it a “reverse acqui-hire.” Others call it poaching. Whatever it’s called, it’s alarming to some in Washington who see it as an attempt to circumvent U.S. laws that protect against monopolies.

“I’m very concerned about the massive consolidation that’s happening in AI,” U.S. Sen. Ron Wyden, a Democrat from Oregon, told The Associated Press. “The technical term is ‘up and down the stack.’ But in plain English, it’s a few companies that control a large part of the market and are just focused — instead of focusing on innovation — on buying up everyone else’s talent.”

So-called “acqui-hires,” in which one company buys another to absorb talent, have been common in the tech industry for decades, according to Michael A. Cusumano, a business professor at the Massachusetts Institute of Technology. But what’s happening in the AI ​​industry is a little different.

“Acquiring only a portion of employees or the majority, but not all, of the technology licenses, and having the company operate but not really compete, that’s a new twist,” Cusumano said.

A similar maneuver took place at AI company Inflection in March, when Microsoft hired co-founder and CEO Mustafa Suleyman to lead Microsoft’s consumer AI business, along with Inflection’s chief scientist and several of its top engineers and researchers. The arrangement has already drawn some criticism from regulators, especially in Europe.

Wyden also wants U.S. regulators to investigate the Amazon-Adept deal. He sent a letter Friday urging antitrust enforcers at the Justice Department and the Federal Trade Commission to “take sustained, focused action to combat undue consolidation across the industry.”

Amazon did not immediately respond to a request for comment on Friday.

“What’s happening here is that instead of buying startups outright, big tech companies are trying to do something new,” Wyden said in an interview before sending the letter. “They don’t want to formally acquire the companies, so they can avoid antitrust scrutiny. I think that’s going to be the playbook until the FTC really starts digging into these deals.”

Officials from the Justice Department and the FTC did not immediately respond to requests for comment on Wyden’s letter.

President Joe Biden’s administration and lawmakers from both parties have pushed for tougher oversight of the tech industry in recent years, which has likely deterred major acquisitions that might have been acceptable in previous eras. For example, U.S. antitrust enforcers plan to investigate the roles played by Microsoft, Nvidia and OpenAI in the artificial intelligence bloomwith the Justice Department investigating chipmaker Nvidia and the Federal Trade Commission scrutinizing business partners Microsoft and OpenAI.

Tech giants including Microsoft, Amazon and Google are trying to be conservative and not make too many acquisitions in the AI ​​sector, Cusumano said.

“It seems smart. I would think they wouldn’t fool anyone,” he said.

For smaller AI startups, the problem is also that building AI systems is expensive, requiring expensive computer chips, power-hungry data centers, huge amounts of data to train with, and highly skilled computer scientists.

Adept, which wants to create AI software agents that help people with tasks in the workplace, said it wanted to do two things at once: build the foundational AI technology and the end-user products. But continuing on that path “would have required us to focus heavily on fundraising for our core models, rather than bringing our agent vision to life,” it said in a statement explaining the Amazon deal.

“They may have decided that they don’t really have a future and just don’t have enough money to compete in this space, so they probably would prefer to be acquired outright,” Cusumano said. “But if Amazon isn’t willing or able to do that, then this is kind of a second-best approach for them.”

Wyden has a longstanding interest in technology and helped write the 1996 law that helped establish the rules of the game for free speech on the Internet. He said he generally favors a straightforward approach that encourages innovation, with restrictions where necessary.

But in the AI ​​industry, he said, “companies like Microsoft, Amazon and Google either own large parts of the AI ​​ecosystem or they have a head start because of their enormous resources.”

John F. Coyle, a law professor at the University of North Carolina, said he believes Amazon hiring Adept workers without buying the company is clearly a move to avoid antitrust concerns. But that type of hiring is not “reverse acqui-hire,” he said.

Acqui-hires are typically face-saving moves that can be turned into success stories, Coyle said, and offer an alternative to liquidating a company. For example, a smaller company can say it sold to Amazon or Facebook parent Meta Platforms and present it as a positive, even if it wasn’t the founders’ original plan.

“This is not acqui-hire. This is outright poaching,” Coyle said of Amazon and Adept.

This isn’t just happening in the tech world, he said, calling the move “a version of a very old story.” In his class, Coyle said, he teaches students about a case from the 1950s involving a New York City advertising agency. Some employees left to start a new company, luring about 100 others to come work for them.

“There are countless cases where one company has raided another company and taken all of their employees,” Coyle said. “That existed before the acqui-hire, that will happen after the acqui-hire.”