Microsoft's $13B Investment In OpenAI Comes Under Scrutiny Of European Competition Regulator

Microsoft Corp‘s MSFT multi-billion dollar investment in artificial intelligence (AI) developer OpenAI is coming under further scrutiny after the European Commission (EC), the EU’s competition authority, said it was “checking” the relationship between the two companies.

Although not an official investigation into the two companies, the EC said in a statement on Tuesday that it was “checking whether Microsoft’s investment in OpenAI might be reviewable under the EU Merger Regulation.”

U.K. Competition Watchdog Already Investigating

This comes a month after Britain’s Competition and Markets Authority (CMA), said it was reviewing whether the $13 billion partnership had resulted in an “acquisition of control.”

The CMA’s announcement was prompted by concerns that the turmoil within OpenAI, which resulted in the board firing and then re-hiring CEO Sam Altman in November, had resulted in a power shift that favored Microsoft.

Certainly, some of the comments made by Microsoft CEO Satya Nadella at the time indicated the $2.8 trillion market cap company was taking a firm hand with its junior partner.

Shortly after Altman’s Nov. 17 firing, Nadella told journalist Kara Swisher on her podcast that he hadn’t been consulted about the decision, and that “there would be no OpenAI without Microsoft.”

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EC Starts Wider Probe Into AI

The EC’s check into Microsoft’s investment in OpenAI came as part of a wider probe into the areas of virtual worlds and generative AI. The EC invited all interested stakeholders to share their thoughts and provide feedback on the level of competition in both areas.

In addition, the commission said it was looking into some of the agreements that have been concluded between large digital market players and AI developers and providers

“The European Commission is investigating the impact of these partnerships on market dynamics,” the regulator said.

Margrethe Vestager, executive vice president in charge of competition policy, said: “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.”

Big Tech Are Big AI Investors

The major concern of global regulators is that just a few big names could gain control of the most innovative AI start-ups and shape the market to their benefit.

Besides Microsoft’s funding for OpenAI, Amazon.com Inc AMZN has invested $4 billion in San Francisco-based AI firm Anthropic, while Alphabet Inc GOOG GOOGL has invested $2 billion in the same company.

While Microsoft’s investment in OpenAI is believed to be about half of its estimated value, Microsoft asserts that it neither controls nor intends to take control of OpenAI.

According to sources cited by Bloomberg, when the tech giant negotiated its additional $10 billion investment last year, it arranged to receive around half of OpenAI’s financial returns until the investment is repaid.

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