Microsoft faces antitrust investigation, OpenAI "caught in the crossfire"?

Last week, Microsoft was reported to be facing a wide-ranging antitrust investigation, and this week, news emerged that OpenAI is also being scrutinized due to this investigation, as U.S. regulators are looking into the deal between OpenAI and Microsoft.

On December 3rd, Eastern Time, technology media The Information cited sources involved in the discussions and those familiar with the situation, stating that the Federal Trade Commission (FTC) has intensified its antitrust investigation into Microsoft. FTC officials have been asking Microsoft's competitors about the impact of Microsoft's transactions and product range in the artificial intelligence (AI) sector.

Specifically, the FTC is inquiring about Microsoft's deal with OpenAI, which granted the cloud computing giant Microsoft exclusive rights to run OpenAI models on its cloud servers, while also allowing it to share some of OpenAI's revenue. A knowledgeable source indicated that the FTC also asked Microsoft's competitors how Microsoft sells its Copilot software integrated with OpenAI and how it resells OpenAI's models to developers on the Microsoft Azure cloud computing platform.

These questions suggest that the FTC is investigating whether Microsoft's dominance in the cloud computing market gives the company an unfair advantage in selling AI software.

Reports indicate that the FTC's extensive investigation into Microsoft began last year, during which it also conducted voluntary interviews with its cloud computing rivals, such as Google, Amazon, and Oracle. Earlier this year, the FTC separately investigated the deal between OpenAI and Microsoft, as well as similar transactions, including investments by Google and Amazon in OpenAI's biggest competitor, Anthropic. As of last month, the FTC had received approval from FTC Chair Lina Khan and other commissioners to begin sending civil investigative demands (CIDs) to Microsoft and its customers and competitors, which are legally enforceable documents.

Under U.S. federal law, the FTC can utilize CIDs when investigating whether a company has engaged in so-called "unfair or deceptive acts or practices." David Balto, an antitrust lawyer in Washington and former assistant director of the FTC, stated that after issuing CIDs, the FTC typically spends several months gathering information before deciding whether to file an antitrust lawsuit. In other words, if the news of the FTC investigating Microsoft through CIDs is true, it will take several more months for the FTC to determine whether to sue Microsoft.

Wall Street Journal mentioned that last Wednesday, Bloomberg reported that the FTC has launched a wide-ranging antitrust investigation into Microsoft, covering various aspects such as cloud computing, software licensing, cybersecurity, and AI products. This action follows more than a year of informal discussions with Microsoft's competitors and business partners, during which law enforcement officials developed detailed requirements spanning hundreds of pages, compelling Microsoft to provide relevant information, and specific requests have already been sent to Microsoft Reports indicate that a key focus of the investigation is Microsoft's bundling of popular office productivity and security software with cloud products. Part of the investigation centers on Microsoft Entra ID, the security software formerly known as Azure Active Directory, which helps users authenticate when logging into cloud-based software.

On Tuesday, Microsoft's Deputy General Counsel Rima Alaily stated on social media that it is ironic that nearly a week after the media revealed that the FTC had issued a request for information to Microsoft, the company still had not received the CID issued by the FTC. Alaily mentioned that she had filed a complaint with the FTC on behalf of Microsoft, questioning whether FTC officials improperly leaked confidential information to Bloomberg