European regulators put Microsoft’s $13 billion bet on OpenAI under closer scrutiny

The Big Tech giant has reportedly pledged to invest $13 billion (€11.8 billion) into the thriving start-up behind ChatGPT, the chatbot that has revolutionised the industry and unleashed a global furore over artificial intelligence (AI).

But OpenAI’s pioneering product has also fuelled fears over the unchecked development of AI-powered systems and the lack of appropriate legislation to crack down on their most damaging side effects, such as impersonation, deep fakes, privacy violations, copyright infringement and the spread of propaganda and disinformation.

The EU is in the final stages of approving the AI Act, a world-first attempt to comprehensively regulate the rapidly evolving technology.

Tuesday’s announcement, which is unrelated to the AI Act, has a competition policy approach to determine whether Microsoft’s eye-popping bet is so large that it effectively amounts to an acquisition and gives the multinational control over the start-up.

As the prime enforcer of competition rules, the European Commission is entitled to oversee, approve and, if necessary, strike down business concentrations that could hurt economic relations across the single market.

Should Microsoft’s investment fall under the EU Merger Regulation, the tech giant would have to submit a formal notification to the executive, a step that would kick-start the investigation process. The probe would apply retroactively, as the investment is already ongoing, and could lead to corrective measures.

Besides this particular case, the Commission will examine “some of the agreements” struck in recent years between large tech companies and developers of generative AI, the sort of technology that produces automated text, visual and audio responses.

“Virtual worlds and generative AI are rapidly developing. It is fundamental that these new markets stay competitive, and that nothing stands in the way of businesses growing and providing the best and most innovative products to consumers,” Margrethe Vestager, the executive vice president in charge of competition policy, said on Tuesday.

Microsoft’s investment in OpenAI began in 2019 with $1 billion and increased over time. In January last year, mere weeks after the headline-making emergence of ChatGPT, the company pledged an additional $10 billion on a multiyear basis.

Microsoft has made AI one of its top business priorities and has integrated the highly adaptable technology into many of its services, including the Bing search engine.

As a research organisation, OpenAI is technically a non-profit entity. However, it operates a “capped-profit” subsidiary that allows investors to make up to 100 times the amount of money they have poured in.