German antitrust agency raises red flag, Microsoft AI applications and collaboration with OpenAI face stricter scrutiny

Microsoft may face stricter antitrust scrutiny in Germany, using artificial intelligence (AI) and other operations.

Germany's antitrust regulator, the Federal Cartel Office (FCO), announced on Monday, September 30th, that Microsoft is considered a "company crucial for cross-market competition." Placing Microsoft in this category means that Microsoft falls under Germany's special abuse control regime, allowing FCO to take action against Microsoft if deemed necessary, prohibiting the company's "anti-competitive behavior."

This marks FCO's determination on Microsoft after a five-year period. As a result, Microsoft in Germany, like Apple, Amazon, Google's parent company Alphabet, and Meta, will be subject to stricter monitoring under Germany's competition law that came into effect in 2021. Furthermore, FCO's new regulatory authority over Microsoft applies to the company as a whole, not just its individual services or products.

FCO's President, Andreas Mundt, stated in Monday's announcement: "Microsoft's numerous products are ubiquitous in companies, government departments, and private households, and have become an indispensable part."

The statement by FCO mentioned that Microsoft's Windows operating system has been dominant for "many years," and its Office products and other software have established a strong influence. Microsoft has also heavily developed the Azure cloud platform and increasingly utilized AI, including through its Copilot AI assistant and collaboration with OpenAI in developing ChatGPT.

FCO emphasized that Copilot AI is utilized in "many parts" of Microsoft's ecosystem. FCO also believes that Microsoft's advantage in cloud computing helps the company establish partnerships with "highly innovative suppliers" as Microsoft can "offer their AI models as a service on Azure and integrate them into their own products."

"Now, Microsoft's ecosystem is stronger and more closely interconnected than ever before," Mundt said.

A Microsoft spokesperson later stated that Microsoft recognizes its responsibility to support a healthy competitive environment and will actively, cooperatively, and responsibly engage in cooperation with FCO.

While FCO has not made any decisions regarding potential litigation, commentators believe that FCO's determination allows the German government regulatory side to closely monitor how Microsoft leverages its influence through activities in the generative AI field.

Microsoft has already invested a total of $13 billion in OpenAI. FCO has previously been monitoring the cooperation between Microsoft and OpenAI. In November last year, FOC stated that it found Microsoft's collaboration with OpenAI did not meet the traditional merger review threshold. However, now with greater authority, FCO can more actively use its power to regulate Microsoft, and the transaction between Microsoft and OpenAI may face stricter scrutiny in Germany.

On Monday this week, Microsoft's stock price fluctuated, hitting a daily low in the morning session with a drop of over 0.6%, then turning higher towards the end of the morning session before falling again in the afternoon session. With a late-session turnaround, it ultimately closed up by over 0.5%, bidding farewell to the closing low since September 12th that was refreshed by two consecutive declines last Friday. It rose by over 3% in September, but fell by over 3.7% in the third quarter