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Microsoft has joined an 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 could face restrictions if the competition authority deems an intervention is necessary.
The designation, which lasts for five years, is important, as it lets the German authority take a close interest in how Microsoft wields its influence through its activities around generative AI.
However, the regulator said it has yet to take any decisions on “possible proceedings.”
In recent years, Microsoft’s influence on OpenAI has landed the pair on antitrust regulators’ radars. The cozy relationship even saw Microsoft briefly hire OpenAI front-man Sam Altman and other key staffers last fall during a board dispute.
Although Altman ended up staying at OpenAI, the episode underscored the closeness between the two companies, and Microsoft even got a board observer seat at OpenAI (it gave it up this summer). However, careful structuring of their arrangement appears to have kept it flying for now.
The FCO has already looked at the two companies’ partnership, and it found last November that their relationship did not meet the threshold for a traditional merger review. However, now that the regulator is armed with more proactive and wide-ranging powers to regulate Big Tech, Microsoft’s dealings with OpenAI could face closer scrutiny in Germany going forward.
The FCO’s press release highlights how Microsoft’s Copilot AI assistant is used “in many parts” of its ecosystem. It also links the company’s strength in cloud computing to helping it enter partnerships with “highly innovative suppliers,” as it can “offer their AI models as services on Azure and integrate them into its own products.”
Commenting in a statement, Andreas Mundt, president of the FCO, also highlighted Microsoft’s long history of software dominance, adding: “Today, Microsoft’s ecosystem is stronger and more closely interconnected than ever before, because overarching all of its activities is the increasing use of the cloud and AI, key technologies in which Microsoft has consolidated its strong position by developing its own products and entering into cooperations.“
The FCO began investigating whether the tech giant’s market power met the bar for the special abuse controls regime back in March 2023. And this confirmation that the company has “paramount significance for competition across markets” unlocks a range of powers contained in the 2021 update to Germany’s antitrust rulebook. The reform aims to counteract 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 the European Union’s Digital Markets Act (DMA), a similar ex-ante competition reform that is also being used to clip Big Tech’s wings.
However, the DMA applies operational controls only to named platforms, while the FCO has designated Microsoft as a whole. This means the German authority has greater freedom to impose controls on Microsoft’s activities, including around AI, if it judges the company’s actions are crimping competition.
The EU’s DMA was drafted before the boom in 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. That limits the European Commission’s ability to intervene in Microsoft’s activities in AI unless they specifically fall within these two “core platform services.”
“Our decision applies to Microsoft as a whole, not only to individual services or products,” Mundt emphasized. “Based on our decision, we can stop anti-competitive practices which are not covered by the DMA.”
Microsoft spokeswoman Sophie Thomas said in an emailed statement: “We recognize our responsibility to support a healthy competitive environment and we will strive to be proactive, collaborative and responsible in working with the Bundeskartellamt [FCO]. Microsoft is partnering with Germany’s most innovative companies, and we’re committed to investing in the growth of its digital economy.”
