Reddit is under investigation by the Federal Trade Commission (FTC) for its practices regarding data licensing for artificial intelligence (AI) training. This news comes as Reddit prepares for its much-anticipated initial public offering (IPO).
The disclosure of the investigation emerged in an amended S-1 registration statement filed with the Securities and Exchange Commission (SEC) on March 15, 2024. The filing came just a day after Reddit received notification of the FTC inquiry.
The FTC launched the investigation following a significant deal between Reddit and Google. In February 2024, the two companies signed a yearly agreement worth $60 million, allowing Google to utilize Reddit’s vast user data to train its AI models. This deal strengthened ties between the two tech giants, with Reddit receiving increased exposure on Google’s platform in exchange for its valuable data.
However, this data-sharing practice has sparked concerns among privacy advocates and regulators. The FTC is likely investigating whether user data is being collected and used appropriately, with transparency and user consent being key factors.
Reddit acknowledged the FTC’s interest in its filing, citing the “unique nature of the technologies and business agreements” involved in AI data licensing. Despite the investigation, Reddit maintains it has not engaged in any unfair or deceptive trade practices.
The FTC’s scrutiny highlights the potential regulatory hurdles Reddit faces as it prepares for its IPO, particularly amidst the growing use and scrutiny surrounding AI technologies. While Reddit expresses confidence it hasn’t violated any laws, the investigation’s duration and outcome remain uncertain, potentially impacting the company’s IPO timeline.
