Microsoft Faces Higher Competition Scrutiny in Germany Over AI
In a significant move to regulate the activities of tech giants, Germany's Federal Cartel Office (FCO) has announced that Microsoft will face heightened competition scrutiny, particularly focusing on its use of artificial intelligence (AI) and its broader market influence.
On September 30, 2024, the FCO confirmed that Microsoft has been designated under a special abuse control regime, a status that will last for five years. This designation is part of Germany's updated antitrust rules, which aim to counteract the market power of large tech companies and ensure a healthier competitive environment.
According to Andreas Mundt, president of the FCO, Microsoft's ecosystem has become "stronger and more closely interconnected than ever before," driven by its dominant position in cloud computing and AI. Mundt highlighted that Microsoft's products, including the Windows operating system, Office applications, and its investment in OpenAI, the maker of ChatGPT, are omnipresent across governments, businesses, and households.
The FCO's decision is based on the premise that Microsoft's market power could potentially hamper rivals' ability to innovate and compete. The regulator has been investigating whether Microsoft's market influence met the criteria for this special regime since March 2023. With this designation, the FCO gains broader powers to intervene in Microsoft's activities, including those related to AI, if they are deemed to be anti-competitive.
Microsoft's partnership with OpenAI has been a particular focus of the FCO. Although the regulator found last November that the relationship between Microsoft and OpenAI did not meet the threshold for a traditional merger review, the new powers granted by the special abuse control regime allow for closer scrutiny of their cooperation. Microsoft's role in integrating AI models into its products, such as the Copilot AI assistant, and its ability to offer these models as services on its Azure cloud platform, are areas of specific interest.
The German law under which Microsoft is being scrutinized predates the European Union's Digital Markets Act (DMA), which also targets Big Tech companies. However, the German regime provides more comprehensive oversight, as it applies to Microsoft as a whole, rather than just specific services or products. This contrasts with the DMA, which only regulates specific core platform services, such as Windows and LinkedIn in Microsoft's case.
Andreas Mundt emphasized that the FCO's decision enables Germany to stop anti-competitive practices that are not covered by the DMA. "Our decision applies to Microsoft as a whole, not only to individual services or products," Mundt stated, highlighting the broader scope of the German regulator's powers.
Microsoft has acknowledged the FCO's decision and expressed its commitment to cooperating with the regulator. A Microsoft spokeswoman stated that the company recognizes its responsibility to support a healthy competitive environment and will strive to be proactive, collaborative, and responsible in working with the Bundeskartellamt (FCO).
This move by the FCO is part of a broader trend of increased antitrust scrutiny in Europe, with other U.S. tech giants such as Google, Meta, Amazon, and Apple already under similar surveillance in Germany. The decision underscores the regulatory environment's increasing focus on the potential anti-competitive impacts of Big Tech's growing influence, particularly in the realm of advanced technologies like AI.