Reddit, the popular online social networking website, on Friday disclosed that the U.S. Federal Trade Commission (FTC) has launched an inquiry into the company’s artificial intelligence (AI) data licensing programs.
The news comes just days before the company’s long-awaited initial IPO that will launch it as a publicly traded company on the New York Stock Exchange (NYSE).
Making the disclosure of the investigation in a filing with the U.S. Securities and Exchange Commission, Reddit said that it received a letter from the FTC on Thursday, March 14, in which the federal agency said it is “conducting a non-public inquiry focused on our sale, licensing, or sharing of user-generated content with third parties to train AI models.”
It further added, “Given the novel nature of these technologies and commercial arrangements, we are not surprised that the FTC has expressed interest in this area. We do not believe that we have engaged in any unfair or deceptive trade practice.”
The FTC is expected to request a meeting with Reddit to learn more about its plans, as well as request information and documents from the company, as part of the inquiry. This disclosure came as an amendment to Reddit’s IPO filing.
In February this year, Reddit had struck a deal worth about $60 million per year with Alphabet’s Google so that it can make its content and platform data available for training the tech giant’s AI models.
This will make it easier to access Reddit from Google products. However, Reddit has said it is in the early stages of “exploring” its data licensing efforts.
Earlier this week, the company said it expects to price shares between $31 and $34 each when it makes its initial public IPO offering on the NYSE with the ticker symbol “RDDT” and aims for a valuation of up to $6.5 billion.
Last year, Reddit’s revenue increased to $804 million, a rise of 20%. Advertising accounted for about 98% of its sales, while the remaining 2% came from data licensing.
According to Axios, Reddit isn’t the only company receiving these so-called “hold letters,” as similar letters have been sent to other companies from the FTC.
Currently, companies like Microsoft, Alphabet and Amazon are being investigated by the FTC over their investments into prominent AI start-ups.
