EU examines Microsoft’s ties to OpenAI

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The EU’s competition regulator is investigating whether Microsoft’s multibillion-dollar investment in OpenAI is caught by the bloc’s merger rules, a move that could lead to a formal probe into the biggest alliance of the recent AI dealmaking frenzy.

“The European Commission is checking whether Microsoft’s investment in OpenAI might be reviewable under the EU Merger Regulation,” the commission said in a statement on Tuesday.

US and UK competition regulators are already examining Microsoft’s up to $13bn investment into OpenAI, the creator of the breakthrough chatbot ChatGPT. The alliance has become one of the tech industry’s most lucrative tie-ups as investors and Big Tech companies poured billions into AI start-ups last year.

Last month, the UK’s Competition and Markets Authority became the first competition watchdog to look into the deal between Microsoft and OpenAI since a messy corporate dispute in November at the start-up led to chief executive Sam Altman being ousted by its board before being rehired days later.

Microsoft, which alongside other investors had pushed for Altman’s reinstatement, ended up taking a non-voting observer seat on OpenAI’s board following the bust-up.

The EU’s review is a preliminary step, but if it found sufficient grounds the commission could then choose to launch a full probe into whether the investment met its regulations.

Antitrust investigations into Microsoft’s partnership with OpenAI are complicated by the unusual nature of their relationship. Despite pledging to invest billions of dollars in IT infrastructure as OpenAI’s “exclusive cloud provider”, Microsoft owns no traditional equity stake in the AI company. Instead, it is entitled to a capped share of its profits.

The commission also said it was “looking into some of the agreements that have been concluded between large digital market players and generative AI developers and providers” and “investigating the impact of these partnerships on market dynamics”.

Big Tech companies have raced to strike deals with a new crop of AI groups since ChatGPT launched in late 2022. Start-ups such as Inflection, Cohere, Anthropic and Mistral have sought access to the vast cloud computing resources and high-performance chips necessary to create large language models, the systems that underpin generative AI tools capable of creating humanlike prose and code or realistic imagery.

Over the past year, Google and Amazon have made multibillion-dollar bets on private AI companies such as Anthropic. Microsoft is also a backer of Inflection, while chipmaker Nvidia has made a series of investments in AI start-ups.

The announcement of Brussels’ studying of Microsoft’s investment comes as the EU’s competition commissioner Margrethe Vestager travels to Silicon Valley this week for meetings with leading US technology executives.

Vestager will meet senior officials at OpenAI during the trip, her office said.

Microsoft and OpenAI did not immediately respond to requests for comment. Last month, Microsoft president Brad Smith said that its relationship with OpenAI was “very different from an acquisition”.

The CMA had asked interested parties, including the companies, whether “the partnership between Microsoft and OpenAI, including recent developments, has resulted in a relevant merger situation”, with a January 3 deadline.

A coalition of civil society organisations, including the Irish Council for Civil Liberties, Article 19, Foxglove and the Mozilla Foundation among others, have submitted views, including a list of issues that should drive CMA’s investigation, including “operational and strategic independence of OpenAI” and “exclusive access that Microsoft has”.