Reportedly, Google has told the US Federal Trade Commission (FTC) that Microsoft’s OpenAI deal is killing AI competition.

Ars Technica (Report: Google told FTC Microsoft’s OpenAI deal is killing AI competition, written by Ashley Belanger and available here) reports that Google wants the FTC to end Microsoft’s exclusive cloud deal with OpenAI that requires anyone wanting access to OpenAI’s models to go through Microsoft’s servers.

Someone “directly involved” in Google’s effort told The Information that Google’s request came after the FTC began broadly probing how Microsoft’s cloud computing business practices may be harming competition.

As part of the FTC’s investigation, the agency apparently asked Microsoft’s biggest rivals if the exclusive OpenAI deal was “preventing them from competing in the burgeoning artificial intelligence market,” multiple sources told The Information. Google reportedly was among those arguing that the deal harms competition by saddling rivals with extra costs and blocking them from hosting OpenAI’s latest models themselves.

In 2024, Microsoft reportedly generated around $1 billion from reselling OpenAI’s large language models (LLMs), while competitors faced added costs to train staff and transfer data to Microsoft’s servers to access OpenAI technology. For instance, Intuit reportedly spent millions each month to use OpenAI’s models hosted on Microsoft servers. This arrangement benefits Microsoft not only through LLM resale revenues but also by boosting cloud server rentals. Additionally, Microsoft takes a 20 percent cut of OpenAI’s revenue, which last year amounted to approximately $3 billion from customers like T-Mobile and Walmart.

Microsoft’s agreement with OpenAI could be seen as anti-competitive if businesses argue to the FTC that the expense and difficulty of switching to Microsoft servers unfairly disadvantage rivals. Critics may claim this dynamic harms the market by stifling innovation and reducing incentives for Microsoft to compete directly with OpenAI. To counter such scrutiny, Microsoft might highlight competing AI offerings from Google and Amazon as evidence of a competitive market. However, these rivals lag significantly behind OpenAI in sales, which could challenge Microsoft’s defense. As the U.S. pushes to lead in AI development, any perception of market foreclosure by a dominant player could prompt closer regulatory examination.

As the FTC continues circling the Microsoft/OpenAI deal, it seems possible that OpenAI may soon want out, The Information reported.

OpenAI initially agreed to the exclusive deal as a condition of receiving $13 billion in Microsoft funding, but the company has been “frustrated” by the limited “amount of servers the startup gets from Microsoft,” The Information reported. To stay ahead of AI rivals, OpenAI may need access to more servers from other tech giants like Google or Amazon, the thinking goes. And if Microsoft perceives a benefit to ending the exclusive deal to prioritize AI innovation, it could dissolve before any officials get a chance to meddle with the terms.

Whether the FTC will continue monitoring Big Tech competition as heatedly under the upcoming Trump administration also remains unclear. Tuesday, Donald Trump announced that Andrew Ferguson, a current Republican FTC commissioner, would be replacing Lina Khan as FTC chair. Ferguson “promised to ease up on the policing of powerful American companies – except for the biggest technology firms,” which he thinks should continue facing “strong scrutiny.”

Of course, you know that Google is a strong advocate for competition! 🤣 Expect the jockeying for position to continue between mega-heavyweight companies on the AI issue. The stakes are as high as they get.

So, what do you think? Do you agree with Google that Microsoft’s OpenAI deal is killing AI competition? Please share any comments you might have or if you’d like to know more about a particular topic.

Image created using GPT-4o’s Image Creator Powered by DALL-E, using the term “two robot runners on a track with one of them struggling because it’s carrying a heavy weight”. This is the image I was trying to generate last night when ChatGPT went down. 😁

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