The European Union is set to intensify its examination of Microsoft Corp.’s substantial $13 billion investment in OpenAI Inc., focusing on the exclusive arrangement granting OpenAI access to Microsoft’s cloud technologies.
On Friday, Margrethe Vestager, the top competition official in the EU, stated that instead of initiating an investigation under the EU’s merger regulations, the focus would shift towards querying Microsoft’s competitors. The queries aim to uncover whether Microsoft’s exclusive contracts with OpenAI could potentially stifle competition.
The investigation was first notable in a report by Bloomberg. Additionally, the EU plans to distribute inquiries concerning Google’s deal with Samsung Electronics Co. for pre-installing the “Gemini nano” small model on specific gadgets.
Vestager also highlighted the growing trend of major tech entities acquiring companies through significant hiring moves, drawing parallels to the U.S. Federal Trade Commission’s probe into Microsoft’s acquisition of talent from Inflection.
Notably, the EU will scrutinize the terms that make Microsoft’s Azure the sole cloud provider for OpenAI to ensure such exclusivity doesn’t hinder competitive practices. Preliminary inquiries like these could escalate to full-fledged investigations by the EU’s antitrust body, potentially resulting in behavioural injunctions and fines if violations are discovered.
Microsoft responded to the scrutiny with an understanding of the European Commission’s comprehensive review, pointing out that the investment and partnership with OpenAI don’t confer control over the company to Microsoft. The company expressed its openness to address further queries from the commission.
Earlier this year, the EU’s antitrust division indicated it was evaluating whether Microsoft’s engagement with OpenAI warranted an investigation sparked by controversies revealing the depth of their association.
This partnership caught the regulatory eye not only of the EU but also of the United Kingdom’s Competition and Markets Authority and the U.S. Federal Trade Commission, particularly after OpenAI’s controversy involving the dismissal and reinstatement of Sam Altman as the head of the company.
Microsoft CEO Satya Nadella played a pivotal role in these discussions, highlighting the intricate relationship between the two firms.
The partnership underscored the significant computing power required to fuel the global surge in generative AI technologies, making OpenAI a key consumer of Microsoft’s cloud services.
This ongoing scrutiny underlines the EU’s diligent approach to ensuring competitive fairness in the market, capable of imposing fines up to 10% of a company’s revenue for anti-competitive behaviour, reflecting the intense regulatory environment Microsoft navigates in the EU.