Microsoft’s increasing influence in OpenAI raises more and more questions. The European Commission announces an investigation into whether this is a merger rather than an investment.

After the chaos in the OpenAI boardroom, Microsoft took tighter control. Last November, CEO Sam Altman unexpectedly resigned, only to return a few days later. A new board was appointed, on which Microsoft was given a seat. The latter raises many questions for regulators. The European Commission announces an investigation into the exact processes at OpenAI.

This research is part of a broader study on “levels of competition in the context of virtual worlds and generative AI,” the announcement said. This includes a closer look at “some of the agreements concluded between major digital market participants,” after which the Commission will also mention Microsoft and OpenAI by name. With the AI ​​law, Europe is trying to get the rapidly growing generative AI market under control.

Investment or merger?

The relationship between Microsoft and OpenAI is therefore special. Both parties found each other in 2019 when Microsoft transferred a billion dollars to the bank account of the then unknown OpenAI. At the beginning of last year, shortly after the launch of ChatGPT, another investment of ten billion dollars followed. After this investment, Microsoft owned 49 percent of the shares of OpenAI’s commercial arm, which is on paper controlled by a nonprofit organization.

So far this is not surprising; investments by large companies in smaller players are commonplace in the technology industry. But the fact that Microsoft is now also on the board changes the situation for the European Commission. If Microsoft actually plays an active role behind the scenes in OpenAI, it can no longer be called an investment, but rather a merger. If the European Commission’s investigation also comes to this conclusion, it would open the door to a follow-up investigation into how the merger affects the AI ​​market.

The European Commission is not the first and only party to raise this question. The UK announced an investigation late last year and the German market regulator had published its findings just days before the mini-crisis at OpenAI. “If Microsoft increases its influence on OpenAI in the future, it must be re-examined whether there is a notification obligation under competition law,” the conclusion states Federal Cartel Office.