Microsoft’s recent deal with UAE-backed AI firm G42 could involve the transfer of advanced AI technology, raising concerns about national security implications. Microsoft President Brad Smith highlighted that the agreement might eventually include exporting sophisticated chips and AI model weights, although this phase has no set timeline. The deal, which necessitates US Department of Commerce approval, includes safeguards to prevent the misuse of technology by Chinese entities. However, details of these measures remain undisclosed, prompting scepticism among US lawmakers about their adequacy.
Concerns about the agreement have been voiced by senior US officials, who warn of the potential national security risks posed by advanced AI systems, such as the ease of engineering dangerous weapons. Representative Michael McCaul expressed frustration over the lack of a comprehensive briefing for Congress, citing fears of Chinese espionage through UAE channels. Current regulations require notifications and export licenses for AI chips, but gaps exist regarding the export of AI models, leading to legislative efforts to grant US officials more explicit control over such exports.
Why does it matter?
The deal, valued at $1.5 billion, was framed as a strategic move to extend US technology influence amid global competition, particularly with China. Although the exact technologies and security measures involved are not fully disclosed, the agreement aims to enhance AI capabilities in regions like Kenya and potentially Turkey and Egypt. Microsoft asserts that G42 will adhere to US regulatory requirements and has implemented a ‘know your customer’ rule to prevent Chinese firms from using the technology for training AI models.
Microsoft emphasises its commitment to ensuring secure global technology transfers, with provisions for imposing financial penalties on G42 through arbitration courts in London if compliance issues arise. While the US Commerce Department will oversee the deal under existing and potential future export controls, how Commerce Secretary Gina Raimondo will handle the approval process remains uncertain. Smith anticipates that the regulatory framework developed for this deal will likely be applied broadly across the industry.
The European Commission announced on Monday that it has classified Booking as a ‘gatekeeper’ under the Digital Markets Act (DMA), signifying its strong market influence. At the same time, the Commission has initiated a market investigation into the regulatory status of social media network X to delve deeper into its market dominance. Despite this, according to the EU, online advertising services such as X Ads and TikTok Ads have not been designated as gatekeepers.
In March, the European Commission identified Elon Musk’s X, TikTok’s parent company ByteDance, and Booking.com as potential candidates for gatekeeper status, subjecting them to stringent tech regulations. While Booking has been officially designated as a gatekeeper, a market investigation has been initiated to address X’s opposition to such a classification. ByteDance was previously labelled as a gatekeeper in July last year, but TikTok has contested this designation at the EU’s second-highest court.
Why does it matter?
The Digital Markets Act (DMA) represents a significant step towards regulating the market dominance of large tech companies. It imposes stricter obligations on these firms, compelling them to moderate content, ensure fair competition, and facilitate consumer choice by making it easier to switch between services. As the EU continues to navigate the complexities of digital market regulation, the classification of gatekeepers and subsequent investigations serve as crucial measures to promote fair competition and protect consumers’ interests in the digital sphere.
A complaint has been lodged against Microsoft Corp. with the Spanish antitrust regulator, alleging anti-competitive behaviour in the cloud computing market. The complaint, filed by Asociación Española de Startups, representing 700 companies, asserts that Microsoft is exploiting its dominance in the software sector to compel the use of its cloud services. The legal move is claimed to impede both cloud providers and customers within Spain’s startup ecosystem, hindering their international growth prospects.
According to the group, Microsoft’s imposition of technical and contractual barriers significantly affects cloud providers and customers, particularly startups in Spain. The association has urged the competition regulator, CNMC, to thoroughly investigate the matter. This complaint mirrors ongoing criticism directed at Microsoft for imposing unfair terms and high costs for running Windows and Office software on competitors’ cloud infrastructure.
The accusation against Microsoft comes amid regulatory authorities’ increasing global scrutiny of its Azure cloud business. Regulators in the EU, the UK, South Africa, and now Spain have raised concerns over potential anti-competitive practices in the cloud computing market. As the investigation unfolds, stakeholders await further developments to assess the implications for competition and innovation in Spain’s tech landscape.
Japan’s cabinet has approved a legislative proposal to curb the dominance of tech giants like Google and Apple by imposing major fines on those that restrict third-party access to smartphone apps and payment systems. This initiative mirrors the EU’s Digital Markets Act (DMA) and targets anti-competitive behaviour, threatening fines of up to 20% of their revenues.
According to government spokesman Yoshimasa Hayashi, this regulation is crucial for maintaining a competitive digital environment internationally and fostering innovation and consumer choice in software necessary for smartphone usage.
Concurrently, the Japanese government is escalating efforts to regulate social media platforms like Meta, addressing the surge in online scams that exploit celebrity images. The local unit of Meta has been criticised for its inadequate response to online scams that exploit celebrity images to commit fraud. Former Digital Transformation Minister Takuya Hirai has suggested that the Japanese Diet might summon Meta CEO Mark Zuckerberg to testify. He criticised Meta for being the ‘most non-compliant platform owner’ and highlighted the company’s insufficient efforts in combating these fraudulent activities.
The UK’s Competition and Markets Authority (CMA) has intensified its scrutiny of major tech players’ involvement in AI startups, targeting Microsoft and Amazon in particular. The CMA is examining Microsoft’s investment in Mistral and the hiring of Mustafa Suleyman, DeepMind’s co-founder, for its new AI division. Similarly, it scrutinises Amazon’s $4 billion investment in Anthropic. These moves have raised concerns about potential monopolistic control and stifling competition, prompting the CMA to solicit comments and potentially launch formal investigations.
Joel Bamford, CMA’s executive director of mergers, emphasised an impartial assessment of these deals and their impact on UK competition. CMA’s Chief Executive Sarah Cardell expressed ‘real concerns’ about the AI market, especially with six tech giants forming an ‘interconnected web’ of AI partnerships. Microsoft and Amazon now face a ‘phase one’ investigation to determine if their deals violate UK merger regulations and pose competition issues, with the possibility of further action in a ‘phase two’ investigation.
Why does it matter?
Microsoft’s €15 million investment in Mistral, coupled with Suleyman’s recruitment and Inflection AI’s integration, has drawn attention. Likewise, Amazon’s collaboration with Anthropic to leverage its cloud services and custom chips for AI models is under scrutiny. Legal experts like Alex Haffner view the CMA’s move as indicative of its keen interest in the evolving AI market. Both Microsoft and Amazon have pledged cooperation, with Microsoft defending such deals as promoting competition and Amazon highlighting differences from other partnerships.
The US Federal Trade Commission (FTC) has taken a significant step in reshaping employment practices nationwide by voting to ban noncompete agreements, deeming them unfair methods of competition. These agreements, especially prevalent in the tech industry, aim to restrict employees from joining or establishing competing businesses. Recent cases, including Amazon’s enforcement and retraction of a noncompete agreement for warehouse workers, have underscored the contentious nature of these agreements.
Under the new ruling, companies must nullify existing noncompete agreements and inform employees of the change. While existing agreements for senior executives are permitted to remain in effect, companies will be prohibited from implementing new noncompete agreements. The FTC defines senior executives as individuals involved in policy-making decisions earning over $151,164 annually.
In response to criticisms of noncompete agreements, the FTC has advocated for alternative measures such as trade secret laws and non-disclosure agreements. FTC Chair Lina Khan emphasised that noncompete clauses hinder wage growth, stifle innovation, and impede economic progress. The agency estimates that approximately 30 million workers are bound by noncompete agreements, prompting the ban’s potential to generate thousands of new businesses annually while enhancing healthcare affordability and increasing worker compensation.
Having initially proposed the ban in January 2023, the FTC anticipates that the new rule will be implemented 120 days after its publication in the Federal Register. This development marks a significant shift in labour practices, signalling a broader reevaluation of the impact of non-compete agreements on workers and the economy.
Japan’s antitrust watchdog has issued a directive to Google, stating that the US tech giant must address its advertising search restrictions that affect Yahoo in Japan. According to the Japan Fair Trade Commission, Google’s practices were found to impede fair competition in the advertising market, particularly in relation to Yahoo Japan Corp., which merged with Line, a Japanese social media platform.
The issue stems from Google’s keyword-targeted search advertising services, which Yahoo Japan utilised after a collaboration initiated in 2010. The Fair Trade Commission claims that Google imposed restrictions in its advertising agreement with Yahoo Japan that hindered competition in targeted search ads for over seven years. Google responded by dropping these restrictions following an investigation by the FTC into potential violations of the Anti-Monopoly Law.
In response to the commission’s findings, Google has pledged full cooperation and emphasised that the commission did not find outright violations of anti-monopoly laws. The company committed to implementing the commission’s directives to enhance search functions for Japanese users and advertisers. Meanwhile, Line Yahoo declined to comment on the matter.
Why does it matter?
Google will remain under scrutiny for the next three years to ensure compliance with necessary changes. However, the commission did not impose fines or other penalties on the tech giant, which remains popular in Japan. This action by the commission comes shortly after another legal setback for Google in Japan, where Japanese doctors filed a civil lawsuit against the company for allegedly allowing groundless derogatory and false comments on its platform. In response, Google stated its continuous efforts to combat misleading or false information through human oversight and technological solutions.
The EU regulators are swiftly moving to conclude a preliminary investigation into Microsoft’s relationship with OpenAI, according to Margrethe Vestager, the EU’s antitrust chief. The probe, initiated in January, aims to determine whether Microsoft’s substantial investment of $13 billion into OpenAI should undergo scrutiny under the EU merger regulations. Vestager indicated in an interview with Bloomberg TV that a resolution is forthcoming, highlighting ongoing discussions with other regulatory authorities.
Vestager emphasised that the EU authorities closely monitor Microsoft’s investments and the broader trend of large tech companies investing in AI. The scrutiny extends beyond Microsoft to include other significant AI investments from major tech firms like Google, Amazon, and Nvidia. The EU mainly ensures competitiveness and prevents anti-competitive practices in this rapidly evolving AI landscape.
Microsoft’s involvement with OpenAI represents a significant stake, with the tech giant investing in other AI ventures, such as French startup Mistral and acquiring the team from Inflection AI. This investment landscape extends to other major players like Google and Amazon, which have their stakes in AI ventures. Vestager stressed the importance of vigilance in this emerging field, characterising it as a critical area for regulatory oversight to safeguard competition and innovation in the AI sector.
Independent browser companies within the EU are reporting significant increases in user numbers following the implementation of new EU legislation to foster fair competition among tech giants. The Digital Markets Act (DMA), effective on 7 March, requires major players like Google, Microsoft, and Apple to present mobile users with a ‘choice screen’ where they can opt for alternative web browsers. Before this regulation, default browsers like Chrome for Android and Safari for iPhones dominated the market, providing free services in exchange for user tracking and targeted advertising.
Since the new rules came into effect, companies like Cyprus-based Aloha Browser have experienced a 250% surge in the EU users. Aloha, known for its privacy-focused approach, has seen its EU market ranking rise from fourth to second place. Similarly, other companies like Vivaldi from Norway, Ecosia from Germany, and Brave from the US have also noted increased user numbers following the regulatory changes. DuckDuckGo and Opera, with substantial global user bases, are also witnessing growth within the EU due to the choice screen.
Why does it matter?
Under the DMA, mobile device manufacturers are required to present users with a selection of browsers, search engines, and virtual assistants during device setup. Apple, for instance, now displays up to 11 browser options alongside Safari in the choice screens tailored for each EU country, updating them annually. However, companies like Mozilla have criticised the rollout as slow and clunky, hindering the migration of users to alternative browsers. The European Commission has initiated an investigation into Apple’s compliance with the new rules, particularly focusing on whether users have genuine freedom to choose alternative services beyond defaults like Safari.
Google’s parent company, Alphabet, is reportedly considering acquiring the marketing software company HubSpot. Despite experts’ views that it would not stifle competition in the market, the deal could face consequential opposition from regulators, even though Google is still preliminarily considering the potential deal and assessing the associated antitrust risks.
Several industry analysts and antitrust experts believe that an acquisition of HubSpot by Google would not negatively impact competition, considering major players like Salesforce, Adobe, Microsoft, and Oracle in the Customer Relationship Management (CRM) software sector. Google does not currently compete in CRM, and the acquisition could strengthen HubSpot’s position with Google’s cloud-computing capabilities, leading to improved offerings and pricing for customers.
However, experts also anticipate that a Google-HubSpot deal would likely face challenges from US and EU antitrust regulators due to their increasing concerns about tech giants expanding through acquisitions. Former general counsel of the US Senate antitrust subcommittee, Seth Bloom, noted that such a deal would likely encounter a harsh reception from regulators and could lead to a lengthy court battle.
The reported consideration of a major acquisition like HubSpot reflects Google’s desire to strategically deploy its substantial cash reserves, estimated at $110 billion, to generate returns. Google has historically avoided large acquisitions since it purchased Motorola Mobility over a decade ago, focusing instead on smaller deals in advertising. Despite its investments in AI, Google’s shareholder returns have trailed behind competitors like Microsoft and Meta Platforms in recent months, prompting interest in potential transformative acquisitions like HubSpot.
