Microsoft's OpenAI investment faces EU investigation

Follows UK CMA launching its own review

The European Commission is examining Microsoft's $13 billion investment in OpenAI, to determine whether a review is necessary under the EU Merger Regulation.

The move mirrors recent actions taken by British regulators, adding another layer of scrutiny to the multibillion-dollar collaboration.

The Commission has also announced it will examine previously concluded agreements between major players in the digital market and developers/providers of generative AI. The focus is on assessing these agreements' impact on market dynamics.

"All interested stakeholders are invited to share their experience and provide feedback on the level of competition in the context of virtual worlds and generative AI, and their insights on how competition law can help ensure that these new markets remain competitive," the Commission wrote.

Interested parties have been invited to submit their views on the matter by 11th March.

An EU review under the Merger Regulation could place the entire multibillion-dollar agreement between OpenAI and Microsoft in jeopardy.

"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," said Margrethe Vestager, EVP in charge of competition policy.

"We are inviting businesses and experts to tell us about any competition issues that they may perceive in these industries, whilst also closely monitoring AI partnerships to ensure they do not unduly distort market dynamics."

Microsoft's involvement with OpenAI dates back to 2019, with the Redmond-based tech giant boosting its investment over the years.

The collaboration has seen OpenAI's technology integrated into Microsoft's flagship products, including Office, Windows and Bing. Microsoft has also provided OpenAI with tools from its Azure Cloud platform.

The collaboration extends beyond technology sharing. In November, OpenAI founder Sam Altman was ousted by the board of directors, only for Microsoft to swiftly announce his hiring to lead a new AI research team.

Facing significant opposition from hundreds of OpenAI employees threatening to resign, Altman was quickly reinstated to lead the company. Shortly thereafter, OpenAI announced that Microsoft would hold a non-voting position on its board.

Despite the deepening ties, Microsoft has stressed that it does not hold an equity stake in OpenAI.

"The only thing that has changed recently is that Microsoft will now have a non-voting observer on OpenAI's board," a company spokesperson said.

As the primary enforcer of competition rules, the European Commission has the authority to review, approve and, if necessary, intervene in business deals that could potentially harm economic relations across the single market.

The investigation comes on the heels of similar actions taken by the United Kingdom's Competition and Markets Authority (CMA) in early December.

The CMA launched an initial review of Microsoft's partnership with OpenAI, specifically probing whether it resulted in a "relevant merger situation." It cited concerns that the partnership could adversely impact competition within the UK market.

The EU is keeping a close eye on the AI market. It is now in the final stages of approving the AI Act, an attempt to regulate rapidly evolving AI technology.