EU’s antitrust arm won’t investigate Microsoft’s $13B deal with OpenAI

Microsoft Corp.’s $13-billion (U.S.) investment into OpenAI Inc. is set to avoid a formal investigation by European Union merger watchdogs, calming fears the relationship could be forced apart.

The European Commission has decided the deal doesn’t merit a formal probe because it falls short of a takeover, and Microsoft doesn’t control the direction of OpenAI, according to people familiar with the matter.

The EU’s antitrust arm said in January it was reviewing whether Microsoft’s involvement with OpenAI should be vetted after a mutiny at the ChatGPT creator exposed deep ties between the two firms.

Although most deals examined under the EU’s merger regulation are eventually approved by Brussels watchdogs, officials are unafraid of wielding a veto if any competition concerns can’t be fixed within strict deadlines.

Microsoft declined to comment, beyond pointing to an earlier statement that its OpenAI partnership has “fostered more AI innovation and competition, while preserving independence for both companies.”

A spokesperson from the commission said that to examine potential competition concerns, the watchdog “first needs to conclude that there has been a change of control on a lasting basis” between the two firms.

At the core of the partnership between Microsoft and OpenAI is the massive amounts of computer power required to keep the worldwide boom in generative AI going.

Running the systems behind tools such as ChatGPT and Google’s Bard has sent demand for cloud services and processing capacity soaring. OpenAI, for example, has become a major customer of Microsoft’s cloud business.

In turn, all three of the world’s biggest cloud-computing providers — Microsoft, Amazon.com, and Alphabet’s Google — have become active investors in AI startups over recent years.

AI outfit Anthropic has attracted a $4-billion investment from Amazon and a $2-billion investment from Google, which also forged a 2021 partnership with AI firm Cohere.

For its part, Microsoft has also been actively on the lookout for more partnerships with burgeoning AI firms. Earlier this year, it announced a $16-million partnership with French tech firm Mistral AI.

Microsoft’s $13-billion OpenAI investment piqued the interest of other regulators — including the UK’s Competition and Markets Authority and the U.S. Federal Trade Commission — after a scandal hit the AI firm over the firing and subsequent rehiring of Sam Altman as chief of OpenAI late last year.

Microsoft chief executive officer

Satya Nadella personally helped negotiate and advocate for his return to the company — at one point offering to hire Altman himself, along with other employees at OpenAI who wanted to leave.

OpenAI’s board eventually agreed to reinstate Altman and the company then named a three-person interim board and added Microsoft as a non-voting observer.

That episode led regulators to examine the agreement. The U.K. watchdog said it would examine whether the balance of power between the two firms has fundamentally shifted to give one side more control or influence over the other, and the U.S. Federal Trade Commission has made early-stage inquiries into the agreement.

The EU said it would look at Microsoft’s investments as part of a broader examination into anticompetitive risks brought by Big Tech involvement in next-generation AI technologies.

The European Commission has decided the deal doesn’t merit a formal probe because it falls short of a takeover, and Microsoft doesn’t control the direction of OpenAI, , according to people familiar with the matter