Competition regulation

EU antitrust probe into Microsoft’s OpenAI investment nears conclusion

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.

Surge in users for EU independent browsers following DMA implementation

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 to bid for HubSpot amid antitrust scrutiny

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.

Why does it matter?

Google’s potential acquisition of HubSpot comes amid existing antitrust challenges, including lawsuits from the US Department of Justice accusing the company of abusing its position in online search and digital advertising markets. The EU also investigates Google and other tech firms for potential new Digital Markets Act (DMA) breaches.

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.

Apple under EU antitrust scrutiny over proposal for Spotify and App Store

The EU antitrust regulators are scrutinising a proposal by Apple to determine if it meets their directive allowing Spotify and other music streaming services to inform users of alternative payment methods outside of Apple’s App Store. This review follows the European Commission‘s recent order and hefty fine imposed on Apple for breaching competition rules. Under Apple’s proposal, services like Spotify can now include links on their apps directing users to their websites to purchase digital content or services, circumventing Apple’s payment system.

However, there’s a catch: any transactions resulting from these links will incur a 27% fee to Apple, including subsequent auto-renewing subscriptions. The European Commission is evaluating whether Apple’s proposal fully aligns with its decision. If there’s suspicion of non-compliance, the Commission may issue a Statement of Objections to address the concerns.

Apple insists that its plan adheres to the Commission’s decision, although Spotify has expressed frustration over Apple’s delay in complying with the EU order, which was issued five weeks ago. Meanwhile, the Commission is conducting a separate investigation into Apple’s App Store rules and its recent measures to comply with the Digital Markets Act (DMA) amid concerns that these could restrict developers from freely communicating and promoting their offerings.

Why does it matter?

The outcome of the EU’s assessment will determine whether Apple faces additional antitrust charges and penalties if its proposal is found to fall short of the Commission’s requirements. The ongoing dispute highlights the broader regulatory scrutiny facing tech giants like Apple over their market practices and dominance in the digital ecosystem, particularly concerning payment systems and app store policies.

Turkey imposes provisional restriction on Meta amid market abuse probe

Turkey’s competition authority has enacted a provisional restriction on Meta, limiting data exchange between Instagram and Threads during an ongoing market abuse investigation. The interim measure now will be maintained until a definitive ruling is made.

The regulator had initiated the probe into Meta back in December due to potential competition law breaches and significant market damage from the data merging of Instagram and Threads. The regulator stated that the company’s data sharing communication across Facebook, Instagram, and WhatsApp lacked clarity and sufficient information. Additionally, the user prompts for data sharing approval were seen as inadequate for addressing competition issues.

Previously, on a separate matter, the Turkish authority had also imposed a daily fine of $148,000 on Meta for its data sharing notification practices.

EU fines Apple €1.8B for Spotify antitrust case, Apple to appeal

The European Commission has imposed a first-time fine of 1.8 billion euros ($1.95 billion) on Apple for restricting Spotify and other music streaming services from offering alternative payment options outside its App Store. This verdict follows Spotify’s 2019 complaint concerning these limitations and Apple’s 30% App Store fees.

The EU competition authority deemed Apple’s restrictions as unfair trading practices. Margrethe Vestager, EU antitrust chief, explained how Apple exploited its market dominance for a decade by limiting developers from suggesting cheaper music services outside the Apple ecosystem, a violation of EU antitrust regulations. Apple is instructed to eliminate App Store constraints, aligning with requirements from the new Digital Markets Act (DMA), which Apple must comply with by March 7.

Apple expressed its intent to contest the EU’s decision in court, stating the ruling disregards the lack of credible proof of consumer harm and overlooks a flourishing and competitive market. The company further remarked that Spotify, the primary proponent and benefactor of this decision, holds the world’s largest music streaming app and has engaged extensively with the European Commission.

TikTok removes Universal Music songs amidst licensing dispute

TikTok initiated removal of Universal Music Publishing Group’s (UMPG) songs due to unsuccessful license renewal negotiations. Following the expiration of their licensing agreement on 31 January, TikTok, while retaining the videos, has begun silencing videos featuring songs from artists associated with UMPG.

The new policy implies that TikTok will need to exclude any music where UMPG songwriters have contributed, irrespective of the main label. This expands the impact beyond UMG-associated artists, affecting others as well—if a UMPG-affiliated songwriter contributed to a song by another label, even minimally, TikTok will be obliged to remove it from its platform.

Despite UMPG’s claim of negligible impact on its revenue, the new changes will adversely impact artists and songwriters who will lose promotion opportunities as the platform is known for enabling music discovery. Artists also stand to potentially lose out on royalty earnings on the platform. UMG recognizes these consequences but maintains its commitment to securing a new deal that justly compensates its artists.

EU Commission plans to fine Apple €500 million for breaches of the competition law

The European Commission is reportedly planning to fine Apple approximately €500 million ($539 million) for alleged breaches of EU competition law. The investigation was initiated after music streaming company Spotify filed a complaint back in 2019, accusing Apple of hindering third-party music services and unfairly favoring its own Apple Music service. Apple’s App Store rules and practices are under scrutiny as they prohibit companies like Spotify from directly billing users, instead requiring them to use Apple’s billing service and giving Apple a cut of up to 30%.

The scope of the investigation was narrowed last year, focusing on whether Apple restricted apps from informing users about cheaper subscription alternatives available outside of the App Store and therefore violating EU competition laws. The latest findings of the investigation are expected to accuse Apple of abusing its market power and imposing unfair trading conditions. If Commission decides to fine Apple, it would be one of the largest financial penalties the EU has ever imposed on a major technology company.

This would be the first time that Apple faces a fine from the European Commission, although it has previously faced fines for anti-competitive behavior in France. The upcoming enactment of the EU’s Digital Markets Act in March aims to address such practices from tech giants like Apple, Amazon, and Google. Under this act, Apple will be required to allow third-party developers to distribute apps outside of the iOS Store and enable those apps to bill their customers directly.

Apple has already taken steps to comply with EU regulations, including announcing changes to its iOS, Safari, and the App Store in the EU. Furthermore, the company has revealed plans to allow software developers to distribute their apps to Apple devices through alternative stores.

Apple declined to comment on the report, instead referring to a previous statement in which it expressed its satisfaction with regulators narrowing the focus of the probe.

Regulators raise concerns over tech giants’ market power in AI sector.

Andreas Mundt, the head of Germany’s antitrust authority, has expressed his concerns about the potential for AI to increase the market power of major tech companies. He stressed the need for vigilant regulatory oversight to prevent anti-competitive behaviour within the AI domain. This highlights ongoing concerns among regulators regarding tech giants, who have significant repositories of user data and the potential to gain an unfair advantage in emerging AI applications across various sectors.

Alphabet’s Google and Microsoft have emerged as competitors in the AI arena, making substantial investments in AI initiatives. Microsoft has focused its resources on OpenAI, while Google has embarked on projects like the Bard AI chatbot.

Governments worldwide are taking action by formulating rules and regulations governing the use of AI. The EU is particularly racing against time to enact its landmark AI regulations by the end of the year. This regulatory approach aims to ensure responsible and ethical AI development and use.

Mundt highlighted the danger in the prerequisites for AI success, which include robust servers and vast volumes of data, both of which big internet corporations possess in abundance. He acknowledged that competition still exists in the AI landscape but urged regulators to take measures to preserve this competition. He also noted the potential for AI solutions from smaller providers to gain popularity and disrupt the current tech hierarchy.

Germany’s regulatory stance is not isolated, as the UK’s Competition & Markets Authority (CMA) has also recently expressed concerns about the monopolization and potential harm to consumers within the AI industry. The CMA’s report emphasised the possible barriers to entry due to the growing computational power and data requirements for training AI models, potentially reducing competition in the sector.

Mundt’s cautionary statement serves as a pertinent reminder of the complexities and possibilities presented by the rise of AI in the tech industry. It underscores the urgency for proactive oversight to prevent the consolidation of power in the hands of a few dominant players. Regulators need to tread cautiously, ensuring that the framework they establish fosters innovation while effectively guarding against any anti-competitive behaviour.

Source: Reuters

G7 digital and tech ministers discuss AI, data flows, digital infrastructure, standards, and more

On 29-30 April 2023, G7 digital and tech ministers met in Takasaki, Japan, to discuss a wide range of digital policy topics, from data governance and artificial intelligence (AI), to digital infrastructure and competition. The outcomes of the meeting – which was also attended by representatives of India, Indonesia, Ukraine, the Economic Research Institute for ASEAN and East Asia, the International Telecommunication Union, the Organisation for Economic Co-operation and Development, UN, and the World Bank Group – include a ministerial declaration and several action plans and commitments to be endorsed at the upcoming G7 Hiroshima Summit.

During the meeting, G7 digital and tech ministers committed to strengthening cooperation on cross-border data flows, and operationalising Data Free Flow with Trust (DFFT) through an Institutional Arrangement for Partnership (IAP). IAP, expected to be launched in the coming months, is dedicated to ‘bringing governments and stakeholders together to operationalise DFFT through principles-based, solutions-oriented, evidence-based, multistakeholder, and cross-sectoral cooperation’. According to the ministers, focus areas for IAP should include data location, regulatory cooperation, trusted government access to data, and data sharing.

The ministers further noted the importance of enhancing the security and resilience of digital infrastructures. In this regard, they have committed to strengthening cooperation – within G7 and with like-minded partners – to support and enhance network resilience through measures such as ensuring and extending secure and resilient routes of submarine cables. Moreover, the group endorsed the G7 Vision of the future network in the Beyond 5G/6G era, and is committed to enhancing cooperation on research, development, and international standards setting towards building digital infrastructure for the 2030s and beyond. These commitments are also reflected in a G7 Action Plan for building a secure and resilient digital infrastructure. 

In addition to expressing a commitment to promoting an open, free, global, interoperable, reliable, and secure internet, G7 ministers condemned government-imposed internet shutdowns and network restrictions. When it comes to global digital governance processes, the ministers expressed support for the UN Internet Governance Forum (IGF) as the ‘leading multistakeholder forum for Internet policy discussions’ and have proposed that the upcoming Global Digital Compact reinforce, build on, and contribute to the success of the IGF and World Summit on the Information Society (WSIS) process. Also included in the internet governance section is a commitment to protecting democratic institutions and values from foreign threats, including foreign information manipulation and interference, disinformation and other forms of foreign malign activity. These issues are further detailed in an accompanying G7 Action Plan for open, free, global, interoperable, reliable, and secure internet. 

On matters related to emerging and disruptive technologies, the ministers acknowledged the need for ‘agile, more distributed, and multistakeholder governance and legal frameworks, designed for operationalising the principles of the rule of law, due process, democracy, and respect for human rights, while harnessing the opportunities for innovation’. They also called for the development of sustainable supply chains and agreed to continue discussions on developing collective approaches to immersive technologies such as the metaverse. 

With AI high on the meeting agenda, the ministers have stressed the importance of international discussions on AI governance and interoperability between AI governance frameworks, and expressed support for the development of tools for trustworthy AI (e.g. (non)regulatory frameworks, technical standards, assurance techniques) through multistakeholder international organisations. The role of technical standards in building trustworthy AI and in fostering interoperability across AI governance frameworks was highlighted both in the ministerial declaration and in the G7 Action Plan for promoting global interoperability between tools for trustworthy AI. 

When it comes to AI policies and regulations, the ministers noted that these should be human-centric, based on democratic values, risk-based, and forward-looking. The opportunities and challenges of generative AI technologies were also tackled, as ministers announced plans to convene future discussions on issues such as governance, safeguarding intellectual property rights, promoting transparency, and addressing disinformation. 

On matters of digital competition, the declaration highlights the importance of both using existing competition enforcement tools and developing and implementing new or updated competition policy or regulatory frameworks ‘to address issues caused by entrenched market power, promote competition, and stimulate innovation’. A summit related to digital competition for competition authorities and policymakers is planned for the fall of 2023.