14. March 2025
Microsoft Under Fire As Ftc Launches Probe Into Exclusive Cloud Deal
The Federal Trade Commission (FTC) has launched an investigation into Microsoft’s exclusive cloud deal with OpenAI, which requires anyone wanting access to OpenAI’s models to go through Microsoft’s servers. Google has reportedly asked the FTC to end the deal, arguing that it harms competition by saddling rivals with extra costs and blocking them from hosting OpenAI’s latest models themselves.
As part of the investigation, the FTC has sought input from Microsoft’s biggest rivals, including Google. The tech giant claimed that the exclusive OpenAI deal stifles competition by making it difficult and costly for rivals to access OpenAI technology. This can lead to higher costs for rivals, which may deter them from competing in the burgeoning artificial intelligence market.
Microsoft benefits significantly from the arrangement, generating approximately $1 billion in revenue from reselling large language models (LLMs) in 2024 alone. The company also takes a 20% cut of OpenAI’s revenue. Microsoft’s profit from this deal is substantial, with many rivals struggling to compete due to the high costs associated with accessing and using OpenAI technology.
The FTC may consider the exclusive cloud deal anti-competitive if it can demonstrate that businesses are finding it excessively burdensome to switch to Microsoft’s servers. This could unfairly disadvantage rivals, potentially stifling competition in the market. The agency also needs to assess whether the deal harms innovation by discouraging Microsoft from competing with OpenAI in the AI market.
Rivals may argue that robust competition exists in the AI market, citing the availability of AI models sold by Google and Amazon as evidence. However, this argument might not convince the FTC, given that rivals’ AI models fall significantly behind OpenAI’s models in terms of sales and adoption. Any perception that the AI market is being foreclosed by an entrenched major player could trigger intense scrutiny from the agency.
The investigation into Microsoft’s exclusive cloud deal with OpenAI highlights the complexities of antitrust law in the tech industry. As the US seeks to become a world leader in AI technology development, regulators must balance innovation and competition with the risk of anti-competitive practices that can stifle growth and limit access to critical technologies.
Silicon Valley is closely watching this case, with optimism growing about a more laissez-faire approach to tech from the new administration. However, it remains unclear whether President-elect Trump’s cabinet will intervene in cases like this, or how the FTC will ultimately rule on the issue.
The implications of this deal go beyond Microsoft and OpenAI, affecting the broader AI market and its development. The FTC’s investigation serves as a reminder that antitrust laws are essential for promoting healthy competition in emerging technologies and ensuring that innovation benefits the wider public.
The tech industry is constantly evolving, with new players entering the fray and existing ones vying for dominance. As AI continues to advance, regulators must adapt to address the unique challenges posed by these rapidly changing technologies. The outcome of this investigation will be crucial in shaping the future of competition and innovation in the AI market.