According to Reddit’s complaint, the company was expecting the FTC’s investigation because of the “unique character” of its technology and cooperation with other companies.
The famous social networking site Reddit is now the subject of an inquiry by the US Federal Trade Commission (FTC) over its data licensing procedures for AI training.
As Reddit prepares to launch its much-anticipated initial public offering (IPO), this investigation emerges. On March 15, 2024, after receiving information the day before, the business informed the U.S. Securities and Exchange Commission about the FTC’s inquiry in a revised Form S-1 registration statement.
According to Reddit’s filing, the company was expecting the FTC’s investigation because of the “unique nature” of its technologies and relationships.
Regardless, Reddit insists it is innocent and has not engaged in any dishonest or unfair business activities. As AI becomes more widely used and accepted, this inquiry reveals the regulatory hurdles that Reddit must overcome.
The business is certain it is following all applicable regulations, but it is aware the inquiry might take a long time and turn out differently than expected.
“Any regulatory engagement could lead to significant financial losses, damage to our brand or penalties, changed policies or practices, the diversion of management and other resources away from our company, or other negative effects on our financial situation, prospects, or results of operations,” Reddit warned. “We may have to cancel or alter our products, services, features, or functionalities as a consequence of any regulatory engagement.”
A key component of the scenario is the $60 million annual agreement that Reddit and Google struck in February. This pact gives Google access to Reddit’s extensive user data for the purpose of artificial intelligence training.
In return for providing useful data, Reddit will get increased exposure on Google’s platforms as a result of this partnership, which also strengthens the connection between the two companies.
Privacy groups and government agencies are worried about companies using user data for artificial intelligence.
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