Microsoft's $13 billion OpenAI pact faces extra EU scrutiny
Microsoft Corp.’s $13 billion investment into OpenAI Inc. is set to come under added scrutiny from European Union’s antitrust watchdogs, who are poised to quiz rivals about the AI firm’s exclusive use of Microsoft’s cloud technology.
Margrethe Vestager, the bloc’s antitrust chief, is expected on Friday to rule out an investigation under the EU’s merger rules, instead announcing that regulators are asking Microsoft’s rivals and customers more about the US company’s exclusivity clauses with OpenAI, and whether they might have a negative effect on competition.
Exclusivity Clauses Under Review
Under the terms of Microsoft’s arrangement with OpenAI, Microsoft’s Azure is the exclusive cloud provider for OpenAI – something that EU regulators want to examine more, according to people familiar with the matter who spoke on condition of anonymity.
Such preliminary questions from the EU can sometimes lead to formal investigations from the EU’s antitrust regulators. These investigations can result in orders to change behavior and potential fines if evidence of abusive practices hampering fair competition is found.
Regulatory Interest in the Microsoft-OpenAI Partnership
The partnership between Microsoft and OpenAI has attracted the interest of regulators, including the EU, the UK’s Competition and Markets Authority, and the US Federal Trade Commission.
Microsoft CEO Satya Nadella played a key role in negotiating and advocating for the return of Sam Altman as chief of OpenAI. The involvement of Microsoft in the decision-making processes of OpenAI raised concerns among regulators, leading to inquiries into the agreement.
Massive Computer Power Required
At the core of the partnership between Microsoft and OpenAI lies the massive amounts of computer power required to sustain the worldwide boom in generative AI. The demand for cloud services and processing capacity has surged with the development of tools like ChatGPT and Google’s Bard.
OpenAI has emerged as a significant customer of Microsoft’s cloud services, further solidifying the ties between the two companies.
Antitrust Scrutiny and History with Microsoft
Microsoft, based in Redmond, Washington, has had a history of antitrust scrutiny from the EU, particularly in relation to its market dominance of Windows. Recent accusations of abuse of market power by bundling the Teams video-conferencing app with other business software have further drawn regulatory attention.
The EU’s antitrust regulations aim to ensure fair competition and prevent anti-competitive practices among firms. Violations of these regulations can result in significant fines for companies found guilty of wrongdoing.
