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OpenAI-Apple Partnership Sparks Antitrust Concerns, Regulators Increase Big Tech AI Scrutiny

Last Updated June 14, 2024 7:34 AM
James Morales
Last Updated June 14, 2024 7:34 AM

Key Takeaways

  • On Monday, Apple announced a deal to integrate ChatGPT into its operating systems.
  • The deal has attracted the attention of the European Commission.
  • Competition authorities around the world are increasingly scrutinizing OpenAI’s business dealings.

Earlier this week, Apple announced plans to integrate ChatGPT into its operating systems. And while some welcomed the news, others have been critical of the partnership with OpenAI.

Responding to questions at a press briefing  on Tuesday, European Commission Competition Spokesperson Lea Zuber suggested the move could bring ChatGPT within the remit of the EU’s antitrust regulation. Considering the Commission is already investigating OpenAI’s relationship with Microsoft, the latest deal with Apple invites further scrutiny.

ChatGPT and the Digital Markets Act

Formally adopted in 2022, the Digital Markets Act (DMA) is intended to prevent large tech companies from abusing their position in the market.

The legislation enforces strict competition rules for so-called “gatekeepers” that provide “core platform services.” At present, only six firms have been designated as gatekeepers: Alphabet, Amazon, Apple, ByteDance, Meta and Microsoft. 

For companies like OpenAI, cozying up with any of the designated gatekeepers is guaranteed to attract the Commission’s interest, let alone forging such close ties with two of them. 

Because iOS is considered a core platform service under the DMA, integrating ChatGPT poses the possibility of OpenAI’s chatbot receiving the same designation. 

As things stand, “large language models (LLMs) do not feature on our list of core platform services” Zuber noted. “That being said, ChatGPT and other LLMs could be integrated into core platform services and once [the ChatGPT–iOS integration] goes ahead then we will be able to make our assessment.” 

Any move to list ChatGPT as a core platform service would designate OpenAI as a gatekeeper. This would give the Commission an obligation to monitor the firm and ensure it doesn’t engage in anticompetitive business practices.

But even without being classified as a gatekeeper, OpenAI is already under investigation for potential antitrust violations.

Competition Authorities Scrutinize Microsoft Investment 

In January, the EU opened a preliminary investigation  into the legality of Microsoft’s $13 billion investment in the AI company. And while recent reports  suggest the deal has dodged a formal merger probe, a more general investigation of its impact on competition remains a possibility.

What’s more, EU authorities aren’t the only ones reviewing the partnership.

Credit for moving first goes to the UK’s Competition and Markets Authority (CMA), which started investigating  whether the investment might count as a merger in December last year. 

Meanwhile, in the US, the Federal Trade Commission (FTC) requested information  from the two companies in January. In a sign that litigation could be incoming, the regulator recently struck a dea l with the Justice Department to divide responsibility for any potential legal action. 

OpenAI a Big Tech Gatekeeper?

The questions raised by Microsoft’s investment in OpenAI also pertain to the emerging issue of its standing in the context of the DMA. 

If the deal has managed to skirt scrutiny under EU merger rules, that’s only because Microsoft doesn’t technically own any OpenAI equity. 

Little is known about the confidential agreement except that it entitles Microsoft to a share of OpenAI’s revenues and generous access to its technology. But how generous? And what happens once Microsoft has recouped its investment? 

The answers to these questions determine important factors such as OpenAI’s annual revenue and valuation. 

To be classified as a gatekeeper under the DMA, a company needs annual revenues of at least €7.5 billion in the European Economic Area and a market value of at least €75 billion. 

OpenAI’s most recent funding round in February valued the startup at $80 billion or more, the New York Times reported . That places it right on the threshold of DMA gatekeeper designation.

ChatGPT certainly has many of the qualities of a core platform service. The underlying LLM already comes pre-configured on Windows devices thanks to Microsoft’s Copilot push. Packaging it into Apple’s software too begins to look a lot like the kind of Big Tech monopoly the DMA is designed to govern.

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