Why Is the FTC Working With Temu While China Advances in AI?

In the chaos of President Trump’s first weeks in office, a stunning revelation has slipped past public scrutiny: The Federal Trade Commission had been actively cooperating with Chinese e-commerce platform Temu to investigate Amazon. Under Lina Khan, the FTC sought information from Temu about Amazon’s pricing policies—essentially using a Chinese company’s complaints to investigate a U.S. tech company deeply integrated into the AI ecosystem. While Chinese firms face little to no scrutiny at home, U.S. agencies are doing Beijing’s work for them.

The timing could not be more troubling. This information emerged just as an AI breakthrough by China’s DeepSeek—purportedly matching GPT-4’s performance at a fraction of the cost—forced the United States to finally acknowledge China is catching up. Think about that: while China demonstrates its growing technological prowess to achieve its goal of displacing American tech leadership, U.S. regulators are partnering with Chinese competitors to target American tech companies.

Yet remarkably, even after the Temu scandal, the chorus calling for aggressive action against U.S. tech companies continues unabated. Some have used DeepSeek to advance their political agenda, claiming that the United States is falling behind in AI innovation because American tech companies are too big. The anticorporate neo-Brandeisians say, “See, we told you so: Big tech is too big and needs to be broken up in hopes of creating space for smaller, nimbler startups to innovate.”

Regardless of whether DeepSeek’s breakthrough is overblown, it demonstrates China’s accelerating capability in AI innovation and potential to become the global AI leader. This should focus America’s attention on strengthening its competitive position rather than undermining it through ideologically inspired regulatory attacks.

The reality is that today’s AI revolution was built on the work of large U.S. tech companies. Google researchers laid the foundation for the AI revolution by creating the transformer architecture in 2017, which now powers virtually all major AI applications from ChatGPT to image generators. While Google did not initially commercialize the technology as aggressively as OpenAI, several former Google researchers co-founded or joined OpenAI and Anthropic, where they played a key role in leveraging transformers to develop large language models like GPT, accelerating their widespread adoption and commercialization across the industry. Amazon pioneered cloud computing in 2006, providing the massive computational infrastructure that made training large AI models possible and accessible to startups.

Far from being complacent monopolists, U.S. tech leaders understand that the stakes are high and want to accelerate innovation. Amazon, Google, and Microsoft have been making massive R&D investments—internally and externally in startups like OpenAI and Anthropic—because they are in intense competition with each other and are acutely aware of Chinese competition. Within a month of Microsoft’s 10 billion investment in OpenAI, Google struck a similar deal with Anthropic, clearly showing the competitive incentives at play. These partnerships that fuel cutting-edge AI innovation are now under antitrust scrutiny. Google’s executives were already discussing the possibility of China catching up in AI back in 2017, long before anyone in the policy world took the threat of an innovative China seriously.

Moreover, the success of U.S. AI startups undermines the monopoly narrative. OpenAI and Anthropic prove there is room for both established players and new entrants in the AI ecosystem, entrants that may lead to Schumpeterian creative destruction of existing big tech information players. Rather than stifling competition, major tech companies have become vital partners in commercializing and scaling breakthrough innovations. The prospect of acquisition also provides crucial incentives for venture capital investment in high-risk AI innovation, while partnerships with large tech companies give startups access to the massive computing infrastructure needed to train and deploy AI. As the history of tech shows, this dynamic creates a virtuous cycle where both incumbents and newcomers can thrive, driving faster innovation and broader dissemination of breakthrough technologies.

Now that DeepSeek has demonstrated China’s advancement, proponents of aggressive antitrust policies argue that China is innovating more because it has cracked down on its tech companies. They never did. The supposed crackdown on Alibaba was not because it was too big but because Jack Ma committed the cardinal sin of going against CCP leadership. The CCP still wants massive firms to go out and conquer the world. Unlike the United States, the CCP has a domestic “pro-trust” policy, actually encouraging or requiring firms to merge to gain global market share. In contrast, the United States and its allies have been playing the role of the CCP’s “useful idiots” by bringing the antitrust hammer down on U.S. tech companies. If anything, large U.S. tech companies have been facing more antitrust scrutiny than any other U.S. or Chinese industry in recent years, both domestic and global.

The EU has extracted billions in fines from U.S. tech companies while actively working to replace them with European alternatives through its Digital Markets Act, which was explicitly designed to target U.S. tech firms. Meanwhile, Chinese tech firms have largely escaped such scrutiny. This regulatory pressure has now reached its peak in the United States itself, with the Department of Justice’s radical proposal to break up Google—a company that achieved its market position primarily through organic growth and innovation rather than acquisitions—by forcing it to sell Chrome and potentially Android. The combined effect of these investigations, new laws, and regulations that disproportionately target U.S. tech companies has undermined the industry’s ability to focus on and invest in AI innovation. This has created an opening that China is now exploiting to catch up.

Anti-U.S. tech policies, often pursued through antitrust action, have become an end in themselves rather than a means to enhance competition and innovation. Blinded by ideology, U.S. regulators have gone so far as to weaponize Chinese competitors against American companies at the forefront of technological innovation—effectively doing Beijing’s work for them. Regardless of China’s growing ambitions, the technological stakes, or the clear success of U.S. startups, the prescription remains unchanged: break up America’s leading tech companies.

This rigid ideology threatens to fragment U.S. R&D capabilities precisely when the country needs to accelerate AI development. The massive resources companies like Microsoft and Google are pouring into AI research and development aren’t signs of monopolistic complacency, they reflect an acute awareness of fierce global competition. Weakening these companies would also weaken America’s competitive position while creating opportunities for Chinese firms to expand their technological lead. The massive market reaction to DeepSeek demonstrates both AI’s strategic importance and how quickly technological leadership can shift.

DeepSeek could be a Sputnik wake-up call, but not if the neo-Brandeisians on both the left and the right have their way. Imagine if the Eisenhower administration’s response to the Soviet’s success was to call for a breakup of the “big tech” of the era involved in space and satellites. On the contrary, the United States doubled down on leading American companies, massively invested in R&D, created NASA and DARPA, and won the Cold War. That’s the kind of thinking the United States needs today.

The stakes could not be higher. Chinese dominance in AI would render domestic tech regulation debates moot while reshaping global power dynamics. America needs its tech leaders at full strength to maintain strategic leadership. Breaking them up over theoretical antitrust concerns risks ceding AI supremacy to China—with consequences far graver than any claimed domestic market issues.

The stakes go beyond Sino-American rivalry—U.S. tech leadership is vital for ensuring AI development aligns with values shared across free societies. Surrendering this edge risks allowing authoritarian regimes to dictate the future of tech governance. This isn’t about choosing between innovation and competition, it’s about maintaining technological leadership or watching it slip away to a Marxist-Leninist strategic rival.

The DeepSeek breakthrough does not vindicate or discredit antitrust policies but is a wake-up call. Rather than celebrating moves to hobble its tech ecosystem, the United States needs a coherent national strategy that leverages all American innovative capabilities—established firms and start-ups—to ensure AI leadership remains anchored in democratic societies.