Microsoft’s $13 billion investment in artificial intelligence company OpenAI is under increasing scrutiny from European Union antitrust watchdogs.
The European Union is set to question Microsoft’s rivals over the AI company’s exclusive use of Microsoft’s cloud technology, a move that could have major implications for competition in the continent’s tech industry, Bloomberg reported.
European Union antitrust chief Margrethe Vestager announced on Friday that the European Union had decided not to investigate the deal under its merger rules, after being unable to prove Microsoft’s control over OpenAI.
Instead, regulators are focusing on Microsoft’s exclusivity terms with OpenAI and their potential negative effects on market competition.
Wider implications and regulatory measures
The EU will also field questions about Google’s arrangement with Samsung to pre-install its Gemini Nano smartphone on certain devices.
Vestager stressed that the European Union is studying how big technology companies can acquire companies, especially through mass hiring.
This initial step follows the US Federal Trade Commission’s investigation into Microsoft’s hiring practices for Inflection employees.
“We will make sure that these practices do not creep into our merger control rules if they fundamentally lead to concentration,” Vestager said.
Microsoft’s agreement with OpenAI designates Microsoft Azure as OpenAI’s exclusive cloud provider, an important aspect that the EU wants more scrutiny of.
Initial questions from the EU are likely to lead to formal investigations, which could lead to orders to change business practices or fines for any identified anti-competitive behaviour.
Microsoft said in a statement, “We appreciate the European Commission’s comprehensive review and its conclusion that the company’s investment and partnership with OpenAI does not give us control over the company.” “We are ready to answer any additional questions the European Commission may have,” she added.
Context
The European Union’s interest in the partnership between Microsoft and OpenAI sparked a scandal involving the latter’s leadership, according to Bloomberg.
The firing and subsequent reappointment of Sam Altman, with Microsoft CEO Satya Nadella playing a pivotal role, raised questions about the balance of power between the two companies.
The UK Competition and Markets Authority and the US Federal Trade Commission are also examining the implications of this partnership.
At the core of the partnership between the two companies is the massive computing power required for generative AI technologies like ChatGPT.
OpenAI has become an important customer of Microsoft’s cloud services, which raises further doubts about the interconnectedness of its operations.
Under EU merger rules, deals are scrutinised within strict timeframes, and companies must address specific competition concerns.
Classic EU competition law allows targeting of anti-competitive agreements and abuse of dominance, with potential fines of up to 10% of a company’s revenue.
This latest scrutiny follows a long history of antitrust battles between Microsoft and the EU, including recent accusations of market abuse related to the bundling of its Teams video conferencing app with other business software.
