The European Union has stepped up scrutiny of AI giants' deals

EU regulators have stepped up scrutiny of the trading practices of tech giants, including in the field of artificial intelligence. Analysts point out that the move ensures that consumers have more choices while curbing vicious competition. However, there are still concerns that excessive regulation may affect the AI development process and increase the financial burden on companies.

Microsoft's collaboration with OpenAI and others faces scrutiny

According to Bloomberg, the European Union's antitrust authority recently said it was ready to revisit Microsoft's cooperation with OpenAI and seek more regulatory scrutiny of Google's deal with Samsung in the field of artificial intelligence.

Margaret Vestager, the head of competition in the European Union, said she was ready to ask competitors about an exclusivity agreement for OpenAI's exclusive use of Microsoft's cloud technology. She sent a questionnaire to Microsoft, Google, Meta and other big tech companies that have partnered with artificial intelligence in March. "We have reviewed the responses and are now sending follow-up requests for information about the agreement between Microsoft and OpenAI on whether certain exclusivity clauses will negatively impact competitors."

In response, Microsoft said it would be ready to answer any other questions the European Commission might ask. According to media reports, Microsoft, the main investor in OpenAI, has invested at least $13 billion since the two sides began working together in 2019. Especially after OpenAI's "personnel earthquake" in November last year, Microsoft was given an observer seat on the board. Under the terms of the agreement between Microsoft and OpenAI, Microsoft will provide OpenAI with cloud computing and AI tool support, and Microsoft's Azure cloud computing platform will also be the main platform for OpenAI to train its AI models.

According to the analysis, unlike M&A reviews, which take a short period of time, antitrust investigations tend to last for several years. But those companies that are ultimately found to have violated the law face hefty fines and legal risks for bundling products or preventing competitors from accessing key technologies.

These EU moves underscore the unease that global regulators are concerned about Big Tech companies using their dominance in the new technology sector. Experts pointed out that in the context of the overall tightening of the EU's regulatory trend on technology giants, if the EU drafts a new provision similar to the "digital gatekeeper obligation" as the previous Digital Markets Act (DMA) did, it may impose more restrictions on investment and mergers and acquisitions of large companies.

In addition, the EU is also concerned about the concentration of technical talent in the tech giants. Vestager said she is looking at "buy-and-hire" behavior, in which one company buys another, primarily to acquire talent and teams. Microsoft, for example, bought the startup Inflection for $650 million in March, allowing it to use Inflection's model and hire most of its employees. "If these practices end up leading to a concentration of businesses, we will make sure they don't violate our merger control rules."

Vestager also mentioned concerns about big tech companies hindering smaller AI developers from reaching users and businesses. "We also sent a request for information to better understand Google's agreement with Samsung," she said. Some Samsung devices come pre-installed with a minimal version of the Google Gemini AI base model. In January, Google struck a multi-year deal with Samsung to embed its generative AI technology into Samsung's Galaxy S24 series of smartphones.

Strengthen supervision to ensure transaction compliance

On March 7 this year, the European Union's Digital Markets Act came into effect. From overhauling online platforms to behind-the-scenes engineering, Google, Apple, Amazon, Microsoft, Meta and ByteDance, which are recognized as "gatekeepers" by the bill, have taken steps to comply with the bill.

As one of the EU's antitrust measures against tech giants, the Digital Markets Act will clarify the responsibilities of digital service providers, curb the vicious competition of large online platforms, and ensure that consumers have more choices. Some media pointed out that the bill is a milestone, and its landing means "a turning point in the regulation of large technology companies". Some analysts believe that the bill will reshape the global tech industry.

It is reported that if these enterprises do not comply with the law, they may be fined up to 10% of their turnover; If the violation persists for more than 1 year, it may also be banned from operating in the EU market. The bill also requires apps owned by tech giants to be "interoperable" with competitors, meaning they need to open up their app interfaces to interact and share data with other apps, allowing users to decide for themselves which apps to pre-install on their devices. The bill also prohibits the monetization of mobile phone users' information and prohibits illegal data collection.

According to foreign media reports, Andreas, director of the German Federal Cartel Agency, said at the agency's annual press conference that "the concentration of the digital market will be further deepened, and the strength at all levels, from chips to front-end, will be enhanced, which is a great danger." "Some financial websites say that Nvidia is leading the data center chip market that powers artificial intelligence software, while OpenAI is leading the field of artificial intelligence chatbots, and these companies are leading the development of artificial intelligence.

"But this exclusive party probably won't last long." The report commented. In addition to the European Union, regulators in the United States and the United Kingdom are also closely watching the alliance. U.S. authorities are investigating possible anti-competitive behavior by tech giants including Microsoft, Nvidia and OpenAI in the field of artificial intelligence.

Regarding the impact of antitrust investigations on consumers and markets, Orr, director of competition policy at the Center for International Law and Economics, believes that companies such as Microsoft and OpenAI will have to invest significant resources to meet compliance requirements rather than developing the latest and greatest AI products. This could benefit the AI market by allowing competitors to catch up with their market dominance.

However, some opponents believe that the EU's advanced and excessive regulation may further cause the European AI industry to lag behind, and many pre-regulatory links will affect the AI development process. In addition, requirements such as AI regulation pose significant challenges for innovative startups, resulting in an overburdened economy.

The EU urgently needs to catch up with the development trend of artificial intelligence

According to the 2024 edition of the EU Science, Research and Innovation Performance Report released by the European Commission on June 27, the EU has been investing more in R&D in the past 20 years, but the EU has lagged behind China and the United States in research in the fields of artificial intelligence, Internet of Things, blockchain technology and quantum computers.

In terms of R&D investment intensity, the EU ranked only fifth in the world in 2021, behind the United States, Japan, South Korea and China. In addition, the report points out that the EU faces a triple challenge in R&D, including a failure to fully utilize its R&D innovation ecosystem, persistent R&D innovation gaps, and a technology gap compared to the rest of the world.

At the same time, a recent KPMG study shows that 53% of German companies want to increase their investment in generative AI in the next 12 months, and more than half of them plan to increase their investment by at least 40%. Companies also see the need to catch up in AI strategy, governance, and response to regulation.

Benedict Hecker, partner in financial services, strategy and management consulting, an audit firm at KPMG, said that the experimental phase of generative AI is slowly giving way to the implementation phase, and companies are taking a more strategic approach to generative AI and using it in their day-to-day work, but there is still room for improvement in related areas. Europe needs to accelerate its catch-up in this regard.

In this regard, Germany and France recently held a ministerial meeting at Merseberg Castle near Berlin and issued a joint document saying that the EU needs to strengthen innovation, stimulate investment, create a level playing field, and improve the regulatory framework to maintain its strength in the technological and industrial fields in the future, and to have an advantage in green and digital transformation. The document calls on the EU to support the development of key technologies such as green industries, artificial intelligence, quantum, aerospace, and biotechnology, reduce unreasonable barriers within the single market, and stimulate investment in areas such as digitalization and green transformation. (Reporter Qin Tianhong)

Source: Economic Information Daily