Google has reportedly raised concerns with the U.S. Federal Trade Commission (FTC) about Microsoft’s exclusive cloud agreement with OpenAI. The Information has revealed that Google is advocating for the termination of Microsoft’s arrangement, which mandates that any entity seeking access to OpenAI’s models must utilize Microsoft’s cloud services.
The FTC’s ongoing examination of Microsoft’s cloud-related business practices, according to Ars Technica, has prompted the agency to inquire whether the exclusivity agreement impedes competition in the rapidly evolving AI sector. Google’s position aligns with others who argue that the deal stifles competition by imposing additional costs on Microsoft’s rivals, thereby preventing them from independently hosting OpenAI’s leading-edge models.
In 2024, Microsoft’s revenue from reselling OpenAI’s large language models (LLMs) hit roughly $1 billion, creating a significant challenge for competitors. As noted in reports, firms like Intuit have incurred monthly expenses in the millions to maintain access to OpenAI’s models via Microsoft’s cloud infrastructure.
This deal has proven beneficial to Microsoft, which not only generates income through LLM resale but also earns from increased cloud server usage. Furthermore, Microsoft’s receipt of a 20 percent share of OpenAI’s revenue from customers such as T-Mobile and Walmart has raised eyebrows about the agreement’s possible anticompetitive nature.
While Microsoft’s relationship with OpenAI could be defended by highlighting other available AI models from competitors like Google and Amazon, this line of defense may not withstand scrutiny given the sales disparity of these models compared to OpenAI’s offerings. The FTC’s assessment may focus on whether such arrangements inadvertently create barriers that stifle market innovation, ultimately disadvantaging competing technologies.
As the U.S. strives to strengthen its leadership in the AI domain, the FTC’s findings and any subsequent actions regarding Microsoft’s arrangement with OpenAI could have significant implications for the future of AI competition and innovation.