FTC Launches Inquiry Into Reddit’s API Deals
The Federal Trade Commission (FTC) has initiated an inquiry into Reddit’s API deals, raising concerns just days before the company’s anticipated IPO. The inquiry focuses on Reddit’s licensing of user data to artificial intelligence (AI) companies, casting a shadow over the platform’s profitability prospects.
Reddit confirmed the inquiry on Friday, revealing that it had received notification from the FTC the day before. The regulatory body is set to request a meeting with Reddit and access to various documents as part of the investigation, according to Axios reports.
The scrutiny follows reports from February detailing Reddit’s $60 million annual deal with Google to license user-generated content. This deal was seen as a positive sign for potential investors eyeing Reddit’s revenue streams. Google’s interest in AI development, exemplified by tools like Gemini, has been on the rise.
Initially undisclosed, Google later confirmed a strengthened partnership with Reddit, aimed at integrating AI capabilities through a Cloud partnership using Vertex AI. This collaboration grants Google access to Reddit’s Data API, facilitating easier integration of Reddit into Google products.
Reddit’s decision to impose fees for API usage last year, prompted by large language models scraping content, affected third-party Reddit clients like Apollo. The move raised questions about Reddit’s business practices, prompting the FTC’s inquiry.
While Reddit maintains that it has not engaged in unfair practices, the regulatory scrutiny underscores broader concerns surrounding AI partnerships. The FTC’s inquiry does not indicate a formal investigation yet, and Reddit is not the sole focus of the agency’s attention in this regard.
The unfolding investigation raises questions about Reddit’s data practices, user privacy, and the impact of AI partnerships on platform operations. As the situation evolves, stakeholders await further developments to understand the implications for Reddit’s IPO and the broader tech landscape.
