Mar 15, 2024 - Business

FTC launches inquiry into Reddit's AI deals, ahead of IPO

Reddit logo and Reddit logo on phone.

Photo illustration: Jonathan Raa/NurPhoto via Getty Images.

The Federal Trade Commission has launched an inquiry into Reddit's licensing of user data to AI companies, according to a Friday afternoon disclosure by the social media company.

Why it matters: This comes just days before Reddit is expected to complete its long-awaited IPO.

The latest: Reddit says it received a letter on Thursday, March 14, in which the FTC said it's "conducting a non-public inquiry focused on our sale, licensing, or sharing of user-generated content with third parties to train AI models."

  • The FTC also is expected to request a meeting with Reddit, plus various documents and information.
  • Reddit says that it's "not surprised" by the FTC's interest, given the novel nature of these agreements.

The big picture: Reddit isn't the only company receiving these so-called "hold letters," according to a former FTC official who spoke with Axios on background.

  • This suggests that the commission is trying to get a handle on a rapidly changing industry and how that could affect both competition and consumer data privacy.
  • It does not mean a formal investigation will be launched into Reddit or any other company.
  • In its disclosure, Reddit is careful to note that it doesn't believe it engaged in unfair or deceptive trade practices.

The bottom line: Reddit has told prospective investors that sharing content with AI companies, both for training large language models and for search, could become a lucrative new revenue stream.

Go deeper: Reddit gets ready for IPO, setting a top valuation of $6.4 billion

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