Federal investigators at the US Department of Justice have launched an inquiry into Google’s partnership with Character.AI, examining whether the arrangement may have skirted antitrust laws, according to a report published by Bloomberg on Thursday.
Sources familiar with the matter told the outlet that regulators recently approached the tech giant, raising questions about the structure of its agreement with Character.AI. The focus appears to be on whether Google may have deliberately designed the partnership to avoid triggering a formal merger review process.
Under the deal, signed in 2023, Google secured a non-exclusive license to use Character.AI’s large language model technology. As part of the collaboration, Google also brought on board the startup’s co-founders, Noam Shazeer and Daniel De Freitas, both of whom previously worked at Google.
A spokesperson for the company addressed the inquiry, stating, “We’re always happy to answer any questions from regulators,” and adding, “We’re excited that talent from Character.AI joined the company but we have no ownership stake and they remain a separate company.”
Character.AI did not offer a response to a request for comment, and the Justice Department declined to provide any official statement on the matter.
According to Bloomberg Law, the investigation is still in its preliminary phase and may not necessarily result in formal enforcement action. However, even absent a formal merger filing, the DOJ retains the authority to assess whether the arrangement could harm competition.
The deal with Character.AI mirrors a broader trend among major tech players seeking strategic alliances in the fast-growing generative AI sector. Microsoft, for instance, reached a $650 million agreement with Inflection AI earlier this year, acquiring access to its models and onboarding many of its staff. Similarly, Amazon last year hired the co-founders and several team members from AI firm Adept. Both moves have attracted the attention of regulatory bodies.
Google, meanwhile, continues to face multiple legal challenges from US authorities. The Justice Department has initiated two separate lawsuits aimed at breaking up its market power, one focusing on its dominance in online search, the other targeting its digital advertising operations.
