Report: Microsoft-OpenAI ownership might get conditional OK from EU regulatorson April 18, 2024 at 17:24 Computerworld


Microsoft’s $13 billion investment in OpenAI might not trigger EU antitrust restrictions since it is unlikely to be viewed as an “acquisition” in the legal sense in that jurisdiction.

report Wednesday by Reuters said this means Microsoft would likely avoid more formal investigation procedures and potential regulatory stumbling blocks as a result of its investment in the generative AI LLM provider.

Reached for comment, a European Commission spokesperson said that for a transaction to be “notifiable” to EC as a merger, it has to represent a change in control of the affected company “on a lasting basis.”

The spokesperson did not rule out a more formal and rigorous regulatory approach and said its investigation into the Microsoft-OpenAI deal is ongoing.

“While this transaction has not been formally notified, the Commission has been following very closely the situation of control over OpenAI already before the recent events involving its management, including Microsoft’s role on the OpenAI board and the investment agreements between Microsoft and OpenAI,” the spokesperson said.

The EC has yet to conclude, however, that the relationship between the two companies rises to the level of a “change of control” as a result of Microsoft’s investments.

Reuters’ report on the matter notes that UK and US antitrust regulators are also still in the preliminary stages of approval for the deal, with both the UK’s Competition and Markets Authority and the US Department of Justice and FTC thought to be considering their next steps in terms of formal reviews and probes.

Under EU law, a “concentration,” which would be subject to antitrust review, can take place when the change of control in one company is accomplished. This, according to the Consolidated Jurisdictional Notice, can be done by acquiring “sole control” of a company, in the sense of the controlling entity being able to exercise decisive influence over the other.

Sole control can also, however, be found to exist on a purely legal or factual basis, reflecting the myriad of board, stockholder and voting rights arrangements available to corporations doing business in the EU. A majority of voting rights, for example, could provide effective sole control, while a minority shareholder who is likely to succeed in achieving majorities at shareholders’ meetings could be found to be in de facto control.

UK and EU regulators had warned Microsoft in January that its investments in OpenAI could be subject to review despite the company’s insistence that its position on the board is non-voting and therefore that it had no ownership of OpenAI. 

Microsoft declined to comment.

Generative AI, Government, Microsoft, Regulation

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