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Generative AI and antitrust: European Commission examines Microsoft's investment in OpenAI

Natasha Kumar By Natasha Kumar Apr18,2024

 Generative AI and antitrust: the European Commission examines the investment of Microsoft in OpenAI

AFP For the European Commission, it is Microsoft in OpenAi. It is questionable whether Microsoft's stake in OpenAI “is likely to be subject to review under the EU Merger Regulation”.

TECH – Microsoft's investments in OpenAI, creator of ChatGPT, worry the European Commission. The EU competition watchdog questions whether the tech giant's investment of around $13 billion “may be subject to review under the EU merger regulation.” The Commission is studying “the impact of these partnerships on market dynamics”, it is announced in a press release. In other words, there is a fear that with the exclusive access of the firm founded by Bill Gates to the technologies,  the Californian startup strengthens its dominance, capturing the latest innovations in artificial intelligence (AI).

In January 2023, 2 and a half years after injecting a billion dollars into OpenAI, Microsoft announced a multi-year investment plan in the Californian startup. This investment of more than $10 billion was intended to “accelerate AI breakthroughs” by accelerating research and deploying OpenAI models in its consumer and professional products. This financing should also allow the Redmond company, which obtained a non-voting position on the board of directors of the champion of AI, to consolidate its 49% stake.

< strong>EU questions on agreements between major players in the digital market

A year later, the European Commission announced on Tuesday January 9, 2024 the launch of “two calls for contributions on competition”. The first concerns “virtual worlds” and the second “generative artificial intelligence”. The EU competition watchdog intends to send requests for information to major digital players, to gather their opinions on how to preserve competition in these markets.

The press release also underlines that the institution “is looking at some of the agreements concluded between major players in the digital market and developers and suppliers of generative AI” and “investigating the impact of these partnerships on the dynamic market.”

Among these “partnerships” is Microsoft’s investment in OpenAi. It is questionable whether this acquisition “is likely to be the subject of an examination under the EU merger regulation”.

What concerns the European Commission ? “Artificial intelligence has the potential to become the museum of antitrust horrors if nothing is done. There are reasons to be concerned. We risk seeing in this area the entire catalog of anti-competitive practices that we also see in digital technology, that is to say tied selling, group sales, obstacles to access to data, conglomerate effects and self-preference. All this can happen very quickly”, explained Benoît Coeuré, the president of the Competition Authority, at the end of November during a round table on digital regulation organized in Paris.

One of the risks is that one of these anti-competitive practices is a monopoly or an abuse of position on the part of the tech giants, already ultra dominant, but who, moreover, consolidate their positions by reserving, through their investments and equity stakes, the latest innovations from emerging developers of generative artificial intelligence.

Competition Commissioner Margrethe Vestager will also travel to California next week to take part in a conference on antitrust. She plans to meet several tech personalities there, including the leaders of OpenAI. At the end of November, the board of directors of this startup decided to dismiss the founder of the start-up, Sam Altman, from his position as CEO, who subsequently joined Microsoft. But this decision caused problems at the Windows publisher and Sam Altman quickly regained his position after the appointment of a new board of directors.

Microsoft investment scrutinized in London too

Before the EU, it was the British competition watchdog, the CMA, which announced its intention to examine the partnership between the two companies to assess whether it was more akin to a merger. Microsoft's investment in OpenAI was also scrutinized by the German Federal Cartel Office (FCO), which concluded that the “cooperation” between the two firms was “currently” not subject to merger control. But “if Microsoft were to increase its influence over OpenAI in the future, it would be necessary to re-examine whether there is a notification obligation under competition law,” warned the institution.

The European Commission also carried out a search at Nvidia in Paris at the end of September. The graphics card manufacturer, already raided by the French Competition Authority, is suspected of anti-competitive practices, specifically abuse of a dominant position. It is its chips dedicated to generative artificial intelligence which have aroused the suspicions of the EU, but no formal investigation has yet been officially opened.

Generative AI is at the heart of all observers’ fears. The EU agreed at the beginning of December to regulate this technology, through its Artificial Intelligence Act (AI Act). MEPs particularly called for more transparency on the algorithms and databases used by these systems, which are capable of generating texts, videos, images and sounds. The text, unprecedented globally, intends to limit the potential abuses of AI such as the dissemination of misleading content and other deepfakes.

As for Microsoft, the company co-founded by Bill Gates was already condemned in 2013 by the commission for abuse of dominant position and “non-compliance with its commitments regarding the choice of browser”. A fine of 561 million euros was imposed on the group.

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Natasha Kumar

By Natasha Kumar

Natasha Kumar has been a reporter on the news desk since 2018. Before that she wrote about young adolescence and family dynamics for Styles and was the legal affairs correspondent for the Metro desk. Before joining The Times Hub, Natasha Kumar worked as a staff writer at the Village Voice and a freelancer for Newsday, The Wall Street Journal, GQ and Mirabella. To get in touch, contact me through my natasha@thetimeshub.in 1-800-268-7116

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