January 10, 2024

European Union Considers Scrutiny of Microsoft's OpenAI Investments under Merger Regulations

The European Union (EU) is contemplating a potential review of Microsoft's 49% ownership in OpenAI, the creator of ChatGPT, as it seeks public input on competition in artificial intelligence in anticipation of a potential investigation.

Microsoft's significant stake of 49% in OpenAI, the developer behind ChatGPT, may face examination in Europe, with the European Commission indicating its intention to assess the Redmond-based company's investments in the AI firm under the EU Merger Regulation.

A document released on January 9 on the EU's official website announced a call for contributions regarding competition in "virtual worlds" and AI. The commission mentioned that it had sent "requests for information to several large digital players", although the specific entities involved were not disclosed.

The commission also revealed its scrutiny of agreements between major digital market players and generative AI developers and providers without naming the entities under review.

Regarding Microsoft and OpenAI, the commission explicitly stated:

"Finally, the European Commission is checking whether Microsoft's investment in OpenAI might be reviewable under the EU Merger Regulation."

Microsoft has reportedly invested a substantial sum, at least $13 billion, for a 49% stake in OpenAI. While falling just short of constituting a complete merger, the commission may consider Microsoft's recent involvement in OpenAI's CEO changes, particularly the firing and subsequent rehiring of Sam Altman, as a potential factor.

Altman was dismissed on November 17, 2023, amid internal tensions but was later reinstated after a series of leadership changes within the company. Microsoft played a role by offering Altman a leadership position during the transitional period.

The European Commission's consideration of reviewing Microsoft's investments in OpenAI does not automatically imply impending regulation or legal action. Microsoft has previously navigated European merger law challenges during its acquisition of gaming giant Activision-Blizzard, facing inquiries and fulfilling requests from both EU and UK authorities. The acquisition was successfully completed in October 2023 after nearly a year of scrutiny.

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