The consequence is that any company that does business with the U.S. military, and potentially any company that does business with the government in general, must stop using Anthropic's products for that work.
Anthropic has vowed to fight this designation in court.
Without weighing in on the constitutionality or legality of the move, I think it's obvious that this kind of retaliation power is unmatched by any private business that has a contractual dispute.
If a private business doesn't like Anthropic's terms, it can walk away from the deal, but it can't conduct coordinated retaliation with other companies before ending up in antitrust territory or potentially violating the Sherman Act.
Now for my editorializing: The fact that Pete Hegseth is willing to apply this type of designation against a U.S. company simply because he doesn't like its terms is pretty chilling. It's all the more scary once you consider which terms he objects to.
Every action has an opposite reaction. The DoD has made itself riskier to do business with, and future contacts will have to price that risk in.
FedRAMP and FedRAMP adjacent revenue is non-negotiable for vast swathes of businesses. The designation of "supply chain risk" is viral in nature because no GRC team will dare take such a risk within their supply chain because most customers add BOM requirements in contracts so this will end up falling under those already.
There's a lot of backchanneling going on between Emil and Dario because everyone's in the same circles but it's all for naught.
In Hegseth's voice - No longer politically correct "DoD". It's precisely violent DoW now.
The DoD has been rather consistent that they will decide what to do with a product sold to them, not some random vendor. There is nothing extra to "price in".
The "extra" is that the government is now attempting to unilaterally renegotiate contracts, and if the contractor disagrees, not only do they terminate the agreement but they restrict how other companies can work with you.
Apparently that's not 100% true. The DoD contractor itself can still use Anthropic's technology, just not on U.S. military contract projects.
If you were a contractor to DoD (no way I'm calling them DoW) would you take the risk of doing business with a company that has been labeled a supply chain risk by your main customer?
They will stop just to be sure no boundaries are crossed.
The issue is the onus is on the contractor to prove that Anthropic technology has not tainted US government contracted projects - this is a herculean task verging on impossible. Additionally, most contracts will mandate SLAs around removing BOM risks.
I’d like a lawyer to give some input. If you have a company that deals with the military does this chain down to not being allowed to use Claude or not?
IANAL and this is my understanding of the situation (I can be completely wrong) but yes, any company that deals with military cant use Claude (anthropic)
In fact adding onto it, IIRC this is the reason why google and amazon have to divest essentially from Anthropic if they want Govt. contracts
Hope this helps though a lawyer's input will definitely be more credible. So its good for them to respond as well.