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Brussels is bracing for an antitrust probe into Microsoft’s $13 billion investment in OpenAI after the EU decided not to proceed with a merger review of the most powerful alliance in the artificial intelligence industry.
The European Commission, the EU’s executive arm, began looking into a review under merger control rules in January, but said on Friday it would not proceed due to a lack of evidence that Microsoft controls OpenAI.
But the commission said it is now exploring the possibility of a traditional antitrust investigation into whether the merger between the world’s most valuable publicly traded company and the best-funded artificial intelligence start-up harms competition in the fast-growing market.
The commission also investigated an agreement between Google and Samsung to install a modified version of its Gemini AI system in the South Korean manufacturer’s smartphones, it announced on Friday.
Margrethe Vestager, the bloc’s competition chief, said in a speech on Friday: “The key question was whether Microsoft had gained permanent control over OpenAI. After a thorough review, we have come to the conclusion that this is not the case. So we are closing this chapter, but the story is not over.”
She said the EU had sent a new set of questions to understand whether “certain exclusivity clauses” in the agreement between Microsoft and OpenAI “may have a negative effect on competitors”. The move is seen as a key step towards a formal antitrust investigation.
The bloc already sent questions to Microsoft and other tech companies in March to see if market concentration in AI could potentially block new companies from entering the market, Vestager said.
Microsoft said: “We appreciate the European Commission’s thorough review and its conclusion that Microsoft’s investment and partnership with OpenAI does not give Microsoft control over the company.”
Brussels began investigating Microsoft’s relationship with the ChatGPT maker after OpenAI’s board abruptly fired its CEO Sam Altman in November 2023, only to be reinstated a few days later. He briefly joined Microsoft as head of a new AI research unit, underscoring the close relationship between the two companies.
Regulators in the US and UK are also scrutinizing the alliance. Microsoft is the biggest backer of OpenAI, although its investment of up to $13 billion, which was extended in January 2023, does not include raising conventional capital due to the start-up’s unusual corporate structure. Microsoft has a minority stake in a commercial subsidiary of OpenAI, which is owned by a non-profit organization.
Antitrust investigations typically last years, compared to the much shorter period for merger reviews, and focus on conduct that could weaken competitors. Companies that are ultimately found to be breaking the law, for example by bundling products or blocking competitors’ access to key technology, risk heavy fines and legal obligations to change their behavior.
Vestager said the EU is investigating practices that could actually lead to a company controlling a larger share of the AI market. She pointed to a practice called “acqui-hires”, where a company buys another mainly to acquire its talent. For example, Microsoft recently struck a deal to hire most of the top team from AI startup Inflection, in which it previously invested. Inflection remains an independent company, however, which complicates any traditional merger investigation.
The EU’s competition chief said regulators are also looking into how big tech companies can block smaller AI models from accessing users.
“That’s why we’re also sending requests for information to better understand the effects of the agreement between Google and Samsung to pre-install its small ‘Gemini nano’ model on certain Samsung devices,” Vestager said.
Jonathan Kanter, America’s top antitrust enforcer, told the Financial Times earlier this month that he is also investigating “monopoly choke points and the competitive environment” in AI. Britain’s Competition and Markets Authority said in December that it had “decided to investigate” the Microsoft-OpenAI deal as it invited comments from customers and competitors.