News

Microsoft-OpenAI Deal's Cloud Terms Spark Another EU Antitrust Probe

• By Gladys Rama
• July 01, 2024

Competition watchdogs in Europe have begun an inquiry into whether the Microsoft-OpenAI partnership has been structured in such a way as to stifle competition.

Bloomberg first reported about the investigation on Friday, citing comments made by Margrethe Vestager, competition chief within the European Commission.

Specifically, the commission is investigating whether OpenAI's use of Microsoft Azure -- and only Microsoft Azure -- to develop its generative AI technologies unfairly advantages both companies over competitors.

Microsoft is generative AI darling OpenAI's biggest backer, having contributed a total of $13 billion so far to the San Francisco-based company since 2019. The partnership has been immensely beneficial for both companies, both technically and financially. The near-carte blanche access to OpenAI's technology has enabled Microsoft to build a robust and growing portfolio of enterprise AI solutions under the "Copilot" brand. In exchange, OpenAI received near-carte blanche access to Azure, enabling it to tap into the cloud platform's vast compute resources to train its AI models.

As part of the two companies' agreement, Microsoft is OpenAI's primary cloud provider. It's this aspect of the partnership that the EU is investigating, per Bloomberg's report. The commission plans to directly ask Microsoft competitors whether this exclusivity clause has hindered them.

Microsoft's EU antitrust troubles don't stop there; last week, the commission said Microsoft's past practice of bundling its Teams collaboration solution with Microsoft 365, which only recently ended, potentially constituted an antitrust violation.

Microsoft-Inflection in Crosshairs Again
In addition, according to Bloomberg, the European Commission plans to scrutinize big-ticket tech "acqui-hires," where companies poach another company's employees without purchasing the company outright.

Microsoft's recent dealings with Inflection AI, a developer of AI chatbot technologies, falls under this category. Earlier this year, Microsoft hired over 70 Inflection employees, including high-level scientists, to staff its new consumer AI division. Microsoft also paid a reported $650 million to license Inflection's AI models.

"We will make sure these practices don't slip through our merger control rules if they basically lead to a concentration," Bloomberg quoted Vestager as saying.

This is not the first time Microsoft's Inflection deal has caught regulators' eyes. Earlier this month, the U.S. Federal Trade Commission (FTC ) subpoenaed the two companies in an inquiry to determine whether the deal was deliberately structured to dodge the regulatory approvals process.

The FTC is also investigating the Microsoft-OpenAI deal, in general, for potential antitrust violations.