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EU mulls probe into Microsoft-OpenAI partnership

By Brian Fung, CNN

Washington (CNN) — The European Union is looking into Microsoft’s partnership with OpenAI and whether it may warrant a formal merger investigation, EU officials said Tuesday.

The announcement highlights growing scrutiny of OpenAI, one of the most influential companies in the artificial intelligence industry, after a high-profile leadership crisis last year resulted in the abrupt firing and reinstatement of the firm’s CEO, Sam Altman, and Microsoft (MSFT) gaining a non-voting seat on OpenAI’s board. The tech giant also has a multi-billion-dollar investment in OpenAI.

The EU move follows a similar announcement by UK antitrust officials last month, and a report by Bloomberg that the US Federal Trade Commission was conducting a preliminary probe.

Microsoft has previously said it does not own any portion of OpenAI and that gaining a seat on OpenAI’s board is not the same as a merger. OpenAI, for its part, has said the board seat does not give Microsoft control over the startup’s operations.

The European Commission, the EU’s executive arm, said in a release Tuesday that it “is checking whether Microsoft’s investment in OpenAI might be reviewable under the EU Merger Regulation.”

The inquiry is part of a wider effort to assess competition in the AI field, and officials are also reviewing some of the business contracts that other AI startups have with large tech companies, the commission noted.

Many of these agreements tend to involve commitments to use only one or two cloud providers, or investments by Big Tech companies in the form of free cloud computing credits that critics say risk “locking in” AI developers as customers.

The European Commission added that it was soliciting public feedback on the state of competition in AI, as well as in the virtual reality industry, and had asked “several large digital players” for information related to the study.

“Virtual worlds and generative AI are rapidly developing,” said Margrethe Vestager, a top EU antitrust official. “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.”

Microsoft’s investment into OpenAI includes cloud credits and it has also moved to integrate OpenAI’s technology into Microsoft services.

“There is no OpenAI without Microsoft leaning in, in a deep way, to partner with this company on their mission,” Microsoft CEO Satya Nadella told CNN contributor Kara Swisher on Swisher’s podcast in November, quickly adding: “We love their mission; we even love their independence. We have no issues with it.”

The EU announcement comes as Vestager is expected to meet with a number of tech CEOs in the United States this week to discuss competition issues.

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