Microsoft Under Scrutiny: Antitrust Oversight and Artificial Intelligence

Microsoft faces increased scrutiny from competitors in Germany due to its use of artificial intelligence.

Microsoft has joined the exclusive club of tech giants that are subject to a special abuse control regime in Germany. The country’s Federal Cartel Office (FCO) confirmed on Monday that the software giant may face restrictions if the antitrust authority deems intervention necessary.

This five-year status is significant as it allows German authorities to closely monitor how Microsoft exerts its influence through its generative AI activities.

However, the regulator stated that it has not yet made any decisions regarding “possible investigations.”

In recent years, Microsoft’s influence over OpenAI has attracted the attention of antitrust regulators towards the two companies. Due to their close relationship, Microsoft even hired OpenAI’s frontman Sam Altman and other key employees last fall during a boardroom dispute.

Although Altman ultimately stayed with OpenAI, this episode highlighted the proximity between the two companies, and Microsoft even secured an observer seat on OpenAI's board (which it relinquished this summer). However, the careful structuring of their agreement appears to keep it in effect for now.

The FCO has already reviewed the partnership between the two companies, and last November determined that their relationship did not meet the threshold for traditional merger review. However, now that the regulator is armed with more active and broad powers to regulate Big Tech, Microsoft’s relationship with OpenAI may come under more intense scrutiny in Germany in the future.

In its press release, the FCO emphasized how Microsoft’s Copilot AI is utilized “in many parts” of its ecosystem. It also links the company’s strength in cloud computing to its entry into partnerships with “highly innovative providers,” as it can “offer their AI models as services on Azure and integrate them into its own products.”

Commenting on the statement, Andreas Mundt, president of the FCO, also highlighted Microsoft’s long-standing dominance in the software market, adding, “Today, the Microsoft ecosystem is stronger and more interconnected than ever, as all its activities are based on the growing use of cloud and artificial intelligence—key technologies where Microsoft has reinforced its position by developing its own products and entering into collaborations.”

The FCO began investigating whether the tech giant’s market power meets the threshold for special abuse control back in March 2023. This confirmation that the company is “of primary importance for competition in all markets” opens a range of powers contained in Germany’s updated 2021 antitrust code. The reform aims to address concerns that Big Tech’s market power hinders competitors’ ability to innovate and compete.

German law is already applied to Amazon, Apple, Google, and Meta, having emerged even before the European Union’s Digital Markets Act (DMA) was enacted—an analogous preliminary reform in competition that is also used to clip the wings of large tech companies.

However, the DMA applies operational control only to named platforms, while the FCO has designated Microsoft as a whole. This means that the German authority has greater freedom to impose control over Microsoft’s activities, including around AI, if it believes the company’s actions limit competition.

The EU’s DMA was developed before the boom of generative AI tools made ChatGPT a household name. Microsoft is designated as a gatekeeper, but only two of its platforms are directly regulated: the Windows operating system and its 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 decision applies to Microsoft as a whole, not just to individual services or products,” Mundt emphasized. “Based on our decision, we can halt anti-competitive practices that do not fall under the DMA.”

A Microsoft spokesperson, Robin Koch, who was approached for comment regarding the FCO’s designation, stated, “We recognize our responsibility to support a healthy competitive environment and will strive to be active, collaborative, and responsible in our work with the Bundeskartellamt [FCO]. Microsoft collaborates with the most innovative companies in Germany, and we are committed to investing in the growth of its digital economy.”