Whistleblower Alleges Amazon’s AI Licensing Deal Violated Antitrust Laws

Amazon is facing scrutiny over its $380 million licensing deal with AI start-up Covariant, following a whistleblower’s complaint alleging that the transaction was structured to circumvent antitrust regulations, as first reported by The Washington Post.

The whistleblower claims the deal amounted to a “reverse acquihire,” where Amazon effectively acquired Covariant’s technology and top engineers without going through the formal process required for larger acquisitions, as reported by The Post.

In August 2024, Amazon announced that it had hired three of Covariant’s founders and about 25% of the company’s staff while purchasing a nonexclusive license for Covariant’s neural networking software used in warehouse robots, noted The Post.

Amazon stated the deal would help improve its robotics systems and automation. However, the whistleblower’s complaint to the Federal Trade Commission (FTC), the Securities and Exchange Commission (SEC), and the Department of Justice (DOJ) argues that Amazon structured the transaction to avoid antitrust review.

According to the filing, the $380 million deal exceeded the $119.5 million threshold that typically triggers premerger reporting requirements, reported The Post.

The complaint also highlights terms in the deal that allegedly restrict Covariant’s ability to sell its technology to other companies, turning it into a “zombie” company with limited prospects.

The Post reports that a recorded conversation included in the filing reveals that Covariant’s CEO expressed that the company would only likely make one or two small deals, for amounts far less than the original price paid by Amazon.

The whistleblower, a former Covariant employee, claims the structure of the deal stifles competition in the AI and robotics fields, especially given Amazon’s dominant position in e-commerce.

Amazon spokesperson Angie Quennell defended the deal, stating it did not warrant antitrust review because Covariant remains operational, with some of its employees staying on, as reported by The Post.

She emphasized that the arrangement aimed to enhance Covariant’s technology without limiting its competitive ability. The FTC has confirmed it is reviewing the complaint, but the agency declined to comment further.

This case is part of a growing trend where large tech firms, such as Amazon, Microsoft, and Google, are making strategic moves to acquire valuable AI technologies without formally purchasing companies.

These so-called “reverse acquihires” are raising concerns among regulators, who worry that such deals may limit competition and innovation, particularly in the rapidly developing AI industry.