EU Regulators Eyeball Cloud Terms of OpenAI-Microsoft Deal

Big-ticket generative AI deals have been keeping antitrust watchdogs busy, not least among them the multibillion-dollar Microsoft-OpenAI partnership.

That continued this week, when regulators in the European Union announced an inquiry into whether the two companies' close ties, specifically around Microsoft's Azure cloud platform, constitute anti-competitive behavior.

As reported by Bloomberg on Friday, Margrethe Vestager, competition chief within the European Commission, indicated that the agency is investigating whether OpenAI's use of Azure -- and only Azure -- to develop its generative AI technologies unfairly advantages both companies over their competitors.

Microsoft is 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 fruitful, 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. The commission plans to directly ask Microsoft competitors whether this exclusivity clause has hindered them.

Acqui-Hires and Mega-Deals
The European Commission also 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.

The roundabout acquisition has already caught the attention of the U.S. Federal Trade Commission (FTC), which subpoenaed Microsoft and Inflection earlier this month to determine whether their partnership was deliberately structured to dodge the regulatory approvals process. Now, the EU is wondering the same.

"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.

Microsoft-Inflection is just one of many high-value generative AI deals fanning antitrust worries. Besides Microsoft's partnership with OpenAI, U.S. regulators are also investigating Amazon's $4 billion investment in Claude chatbot maker Anthropic, and Google's $2 billion investment in the same.

About the Author

Gladys Rama (@GladysRama3) is the editorial director of Converge360.