Microsoft sued over secret deal with OpenAI

Windows maker created artificial scarcity to keep ChatGPT price high

Microsoft is facing a class action lawsuit in the USA over its multi-billion-dollar partnership with OpenAI, with consumers accusing the tech giant of secretly inflating the cost of generative services through an allegedly unlawful market-sharing deal.

Filed in the US District Court for the Northern District of California, the proposed lawsuit claims Microsoft used its exclusive cloud computing agreement with OpenAI to restrict access to the resources needed to operate large language models.

According to the complaint [pdf], Microsoft's deep financial and infrastructural entanglement with OpenAI - culminating in more than $13 billion in investments since 2019 - gave it effective control over the startup's compute supply.

Plaintiffs say this control allowed Microsoft to manipulate output and create artificial scarcity of resources, in violation of US antitrust law.

At the centre of the case is an exclusivity clause requiring OpenAI to use Microsoft's Azure cloud platform for all of its compute needs, a condition the plaintiffs argue granted Microsoft unprecedented leverage over one of the fastest-growing sectors in technology.

Allegations of price manipulation

The plaintiffs, all ChatGPT Plus subscribers, allege that Microsoft deliberately constrained the supply of Azure compute capacity during peak demand periods, effectively limiting OpenAI's ability to process user requests and forcing the company to raise prices.

The suit claims OpenAI's API tokens - the digital units used to price and meter access to its AI models - were inflated by "as much as 200 times" compared with competitors.

This allowed Microsoft to extract “supracompetitive profits" from OpenAI's customers while simultaneously promoting its own AI-powered Copilot products embedded in Windows and Office.

DeepSeek disruption

The plaintiffs point to a pivotal moment in early 2025 when Chinese AI firm DeepSeek upended the global AI market with a powerful but low-cost competitor to ChatGPT.

DeepSeek's models operated at a fraction of the cost, triggering an industry-wide price war that OpenAI, under its Azure constraints, was unable to join.

By February, DeepSeek had cut its prices by 75%. Yet OpenAI's prices remained more than a hundred times higher, a disparity the plaintiffs attribute directly to Microsoft's refusal to relax the exclusivity agreement.

Only after OpenAI reportedly secured access to Google's cloud infrastructure in mid-2025 did prices fall, with the company slashing rates by 80% and releasing long-delayed features and new models.

The lawsuit casts Microsoft as a monopolistic "gatekeeper" of AI compute infrastructure. By tethering OpenAI to its cloud platform, plaintiffs argue, Microsoft secured control not just over OpenAI's infrastructure but the direction and pace of innovation in the broader AI ecosystem.

The plaintiffs are seeking treble damages, restitution, attorneys' fees and a permanent injunction preventing Microsoft from enforcing similar exclusivity terms in the future.

They are also asking the court to order the dismantling of Microsoft's control over OpenAI's compute infrastructure to restore competitive conditions in the AI industry.

If the court certifies the class, the case could represent one of the most consequential antitrust challenges in the history of AI.

The case is pending before the US District Court for the Northern District of California.

Antitrust allegations extend to UK

In related news, competition lawyer Maria Luisa Stasi has called on UK firms to get in touch about a potential £2 billion compensation claim she is bringing against Microsoft in the UK’s Competition Appeal Tribunal.

Stasi accuses Microsoft of overcharging businesses that use its Windows Server on Google, Amazon or Alibaba’s cloud services.