Brussels investigates antitrust probe into Microsoft’s partnership with OpenAI

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Brussels is preparing for an antitrust investigation into Microsoft’s $13 billion investment in OpenAI after the EU decided not to pursue a review of the merger with the most powerful alliance in the artificial intelligence industry.

The European Commission, the EU’s executive arm, began a review of merger control rules in January but announced on Friday it would not continue due to a lack of evidence that Microsoft controls OpenAI.

However, the Commission said it was now examining the possibility of opening a traditional antitrust investigation into whether the tie-up between the world’s most valuable publicly traded company and the best-funded artificial intelligence startup harms competition in a fast-growing market.

As revealed on Friday, the commission sought information in connection with Google’s agreement with Samsung to install a modified version of the Gemini AI system on the South Korean manufacturer’s smartphones.

Margrethe Vestager, the bloc’s head of competition, said in a speech Friday: “The key question was whether Microsoft had acquired lasting control over OpenAI. After a thorough review, we concluded that this was 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 find out whether “certain exclusivity clauses” in the Microsoft-OpenAI deal “could have a negative impact on competitors,” a move seen as a key step toward a formal antitrust investigation.

Vestager said the bloc had already sent questions to Microsoft and other technology companies in March to determine whether market concentration in artificial intelligence could potentially prevent new companies from entering the market.

Microsoft said in a statement: “We appreciate the European Commission’s thorough analysis and its conclusion that Microsoft’s investment in and partnership with OpenAI does not give it control over the company.”

Brussels began scrutinizing Microsoft’s relationship with the creator of ChatGPT after OpenAI’s board abruptly fired CEO Sam Altman in November 2023, only to be rehired a few days later. He briefly joined Microsoft as head of its new AI research unit, highlighting the close relationship between the two companies.

Regulators in the U.S. and U.K. are also scrutinizing the alliance. Microsoft is OpenAI’s largest backer, although its investment of up to $13 billion, which was expanded in January 2023, does not include a conventional equity investment because of the startup’s unusual corporate structure. Microsoft has a minority stake in OpenAI’s for-profit subsidiary, which is owned by a nonprofit organization.

Antitrust investigations typically take years to complete, compared with the much shorter period for merger reviews, and focus on conduct that may undermine rivals. Companies that are ultimately found to be breaking the law, for example by bundling products or blocking competitors’ access to key technologies, risk heavy fines and legal obligations to change their behavior.

Vestager said the EU is investigating practices that could ultimately lead to the company controlling a larger share of the AI ​​market. She pointed to a practice called “acqui-hires,” in which a company buys another company primarily to acquire its talents. For example, Microsoft recently struck a deal to hire most of the top team from AI startup Inflection, in which it had previously invested. However, Inflection remains an independent company, which complicates any traditional merger investigations.

The EU competition chief said regulators were also investigating how big tech companies could prevent smaller AI models from reaching users.

“That’s why we’re sending requests for information to better understand the impact of Google’s agreement with Samsung to pre-install a small ‘Gemini nano’ model on some Samsung devices,” Vestager said.

Jonathan Kanter, a top U.S. antitrust enforcer, told the Financial Times earlier this month that he is also examining the “monopoly bottlenecks and competitive landscape” in artificial intelligence. The UK Competition and Markets Authority said in December that it had “decided to investigate” the Microsoft-OpenAI deal after asking for comments from customers and competitors.