European Commission Probes Microsoft's $13B OpenAI Deal

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Updated Microsoft's $13 billion investment in OpenAI is being checked by the European Commission to see if the deal runs afoul of the continent's merger rules.

The European Commission announced the inquiry on Tuesday as part of a broader investigation into competition in the virtual world and artificial intelligence markets.

The commission last July published a regulatory strategy for "Web 4.0" – now that Web 3.0, the notionally decentralized web, has worn out its welcome with crypto-crime and scandal.

Eurocrats summed Web 4.0 up thus, as if decades-old virtual world technology deserved reconsideration in light of headset hardware, an ad-based revenue model, and the repetition of the word "blockchain."

Claiming virtual worlds offer opportunities for better health services, education and training, interaction and collaboration, and novel cultural experience, the EU regulators also acknowledge possible problems, including harm to children, data privacy risks, disinformation, cybercrime, gender-based cyber violence, discrimination, and hate speech.

And so the EU regulators have put out a call [PDF] to industry experts, academics, advocacy organizations, and consumers to submit their thoughts on virtual worlds, with a focus on competition.

They've extended their survey to cover generative AI, which became an unavoidable topic last year as Microsoft and OpenAI, along with Google, Meta, and various others, released increasingly capable AI models built on the creative labor of others, mostly without consent.

"We are inviting businesses and experts to tell us about any competition issues that they may perceive in these industries, whilst also closely monitoring AI partnerships to ensure they do not unduly distort market dynamics," said Margrethe Vestager, Executive Vice-President in charge of competition policy for the European Commission in a statement.

Just last month, the European Parliament and the Council agreed on the commission's AI Act proposal to ensure the safety and fairness of AI systems. At the same time, Europe would prefer not to regulate itself out of the massive investment bounty in AI, estimated at €7.2 billion ($7.9 billion) in the EU alone last year, and in virtual worlds, said to have been €11 billion ($12 billion) in the EU in 2023.

Vestager said these markets are evolving rapidly and it is necessary that they remain competitive in the EU region.

The commission's interest in looking at Microsoft's tie-up with OpenAI, already being scrutinized by the US Federal Trade Commission, is described in vague, exploratory terms: The regulatory body is simply "checking whether Microsoft's investment in OpenAI might be reviewable under the EU Merger Regulation."

"Since 2019, we’ve forged a partnership with OpenAI that has fostered more AI innovation and competition, while preserving independence for both companies," Microsoft told The Register. "The only thing that has changed recently is that Microsoft will now have a non-voting observer on OpenAI’s Board."

OpenAI did not respond to a request for comment. ®

Updated to add

A spokesperson for the European Commission told The Register:

In order for a transaction to be notifiable to the commission under the EU Merger Regulation, it has to involve a change of control on a lasting basis.

While this transaction has not been formally notified, the commission has been following very closely the situation of control over OpenAI already before the recent events involving its management, including Microsoft’s role on the OpenAI board and the investment agreements between Microsoft and OpenAI.