Google’s Character.AI Deal Reportedly Draws Antitrust Attention

The Department of Justice is reportedly probing whether a Google artificial intelligence (AI) deal violates antitrust law.

At issue is Google’s agreement with chatbot maker Character.AI to use that company’s AI technology, Bloomberg News reported Thursday (May 22), citing sources familiar with the matter.

According to those sources, regulators recently informed Google they are investigating whether the company designed that agreement to avoid government merger scrutiny.

Google signed an agreement with Character last year in which that company’s founders joined Google, which received a nonexclusive license to use their venture’s technology.

The Bloomberg report said this sort of deal has been embraced in Silicon Valley as a way for big tech companies to garner expertise for new projects. At the same time, regulators worry that companies such as Google are using their dominant market position to potentially stifle competition from up-and-coming innovators.

Peter Schottenfels, a company spokesperson, told PYMNTS via emailed statement that the search giant is “always happy to answer any questions from regulators.”

“We’re excited that talent from Character.Ai has joined the company, but we have no ownership stake and they remain a separate company,” he added.

Google has lost a pair of antitrust cases brought by the U.S. government over its anticompetitive practices as it monopolizes the search and online tech markets. The company has said it plans to appeal in both cases.

Meanwhile, PYMNTS wrote earlier this month about Google’s effort to test placing ads inside AI chatbot conversations “in an aggressive move to protect its bread and butter: search ads.”

The company has begun embedding ads directly into conversations with AI chatbots from startups, including iAsk and Liner. This marks an expansion of Google’s AdSense for Search network and sets the stage for a new era of AI-powered monetization.

Kaveh Vahdat, president of marketing firm RiseOpp, said in an interview with PYMNTS that Google’s move is “less about short-term monetization and more about safeguarding its long-term control over the discovery layer of the internet.”

As users pivot to AI chatbots, Vahdat said, Google risks losing out on the behavioral data and ad real estate that support its business model.

“By preemptively commercializing chatbot interactions, it is trying to reassert that control. But doing so at a time when its market dominance is already under antitrust scrutiny could accelerate regulatory pressure.”