EU Joins List of Regulators Considering Microsoft-OpenAI Investigation

KEY TAKEAWAYS

The European Commission "is checking whether Microsoft’s investment in OpenAI might be reviewable under the EU merger regulation."

The European Commission is evaluating whether or not to launch a review into Microsoft’s investment in OpenAI.

The EU released a statement yesterday that said: “The European Commission is looking into some of the agreements that have been concluded between large digital market players and generative AI developers and providers.

“The European Commission is checking whether Microsoft’s investment in OpenAI might be reviewable under the EU merger regulation.”

The news comes just a month after the UK Competition and Markets Authority (CMA) announced it was launching an investigation into Microsoft and OpenAI’s relationship to identify whether or not their commercial partnership had established a “merger situation”.

Reached for comment, a Microsoft spokesman said: “Since 2019, we’ve forged a partnership with OpenAI that has fostered more AI innovation and competition while preserving independence for both companies.

“The only thing that has changed recently is that Microsoft will now have a non-voting observer on OpenAI’s Board.”

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Examining AI Monopolies

While the commission hasn’t officially launched a formal investigation into the two tech giants, the statement highlights that the EU is eyeing regulation to keep the market competitive.

As Margrethe Vestager, executive vice president in charge of competition policy for the European Commission, said, it includes “closely monitoring AI partnerships to ensure they do not unduly distort market dynamics.”

“The EU’s increasingly assertive approach to competition policy comes on top of a new act to regulate AI,” Max Heinemeyer, chief product officer at Darktrace, told Techopedia.

“The potential of these technologies is huge, and it will be important for the EU to ensure that its concerns about competition and AI don’t hold back organizations from realizing the potential of responsible AI to drive economic growth and improved public services.”

Yet it’s not just EU regulators who are looking at the Microsoft-OpenAI partnership with a keen eye, the Federal Trade Commission (FTC) is also reportedly unofficially examining the alliance to determine whether it may violate antitrust laws.

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Regulators have taken a close interest in this partnership in response to broader concerns about the formation of monopolies in the AI industry and the risk that a  handful of providers, like OpenAI and Microsoft, can position themselves to dominate innovation in the market.

After all, these companies have millions to spend on researching and developing proprietary language models and datasets, which companies with less resources simply cannot compete with at this stage in the technologies’ lifecycle.

Assessing the Long-Term Impact

Although it’s difficult to tell whether the EU and FTC will launch formal investigations into OpenAI and Microsoft, it’s unlikely that such an action would damage the development of either company or the AI market in the long term.

“The EU’s effort might not end up affecting AI development at all considering their concern is over the legality of the partnership under the EU Merger Regulation,” said Gal Ringel, CEO at data privacy management firm Mine.

“OpenAI has grown so large and influential over the past year that even a ruling against the company now would only prove a temporary roadblock, as the company would surely find ample investment if it needed to pursue that route,” Ringel said.

For now, the key takeaway is that regulators are paying close attention to the potential establishment of monopolies in the space and are prepared to respond if necessary.

The Bottom Line 

The EU’s look into the Microsoft-OpenAI partnership demonstrates that the regulatory landscape is growing increasingly complex.

Not only are vendors being judged on their ability to mitigate the risk of AI, but they are now under increasing pressure to manage their commercial alliances so that they aren’t regarded as monopolies.

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Tim Keary

Since January 2017, Tim Keary has been a freelance technology writer and reporter, covering enterprise technology and information security.