Microsoft has joined an exclusive club of tech giants that are subject to a special anti-corruption regime in Germany. The country's Federal Cartel Office (FCO) acknowledged on Monday that the software giant could face restrictions if competition authorities decide intervention is necessary.
This designation is valid for five years and is important because it allows German authorities to pay close attention to how Microsoft wields influence through its activities around generative AI.
But the regulator said it had not yet made a decision on “potential litigation.”
Microsoft's influence over OpenAI has brought the two companies to the attention of antitrust regulators in recent years. The cozy relationship even led Microsoft to temporarily hire OpenAI frontman Sam Altman and other key staff during last fall's board dispute.
Although Altman ended up staying with OpenAI, the episode highlighted the closeness between the two companies, and Microsoft also gained an observer seat on OpenAI's board (which it relinquished this summer). But the careful construction of their arrangement seems to continue to work well for now.
The FCO had already investigated the partnership between the two companies and found in November last year that the relationship did not meet traditional merger review criteria. But Microsoft's deal with OpenAI could face increased scrutiny in Germany going forward, as regulators have more aggressive and broader powers to regulate Big Tech.
The FCO's press release highlights how Microsoft's AI assistant Copilot is being used in “many parts” of the ecosystem. The company's strength in cloud computing also allows it to “deliver AI models as a service on Azure and integrate them into its own products,” helping it form partnerships with “highly innovative suppliers.” Connect.
FCO Chairman Andreas Mundt also commented in a statement, highlighting Microsoft's long history of software dominance, adding: Cloud and AI are key technologies that Microsoft has established with unique products and collaborations. ”
The FCO launched an investigation in March 2023 into whether the technology giant's market power met the criteria for a special fraud regime. And this confirmation that the company is “of paramount importance to cross-market competition” will unlock a range of powers included in the 2021 update. German antitrust law rulebook. The reforms are aimed at countering concerns that Big Tech's market power is hampering rivals' ability to innovate and compete.
The German law already applies to Amazon, Apple, Google, and Meta, and predates a similar ex-ante competition reform, the European Union's Digital Markets Act (DMA), which could nip the wings of big tech companies. It is also used for
However, the DMA only applies operational controls to specified platforms, whereas the FCO specifies Microsoft as a whole. This means German authorities will have more freedom to impose restrictions on the company's activities, including those related to AI, if they determine that the company's actions are stifling competition.
The EU's DMA was drafted before ChatGPT became well-known with the boom in generative AI tools. Although Microsoft has been designated as a gatekeeper, only two platforms are directly regulated: the Windows operating system and the social network LinkedIn. This limits the European Commission's ability to intervene in Microsoft's AI activities, unless they specifically fall under these two “core platform services.”
“Our decisions apply to Microsoft as a whole, not just individual services and products,” Mundt stressed. “Based on our decisions, we can stop anti-competitive conduct that is not covered by the DMA.”
Asked for comment on the FCO designation, Microsoft spokesperson Robin Koch wrote: [FCO]. Microsoft partners with Germany's most innovative companies and is committed to investing in the growth of the digital economy. ”