Microsoft has become part of an exclusive group of tech giants that are subject to a special abuse control regime in Germany. The country’s Federal Cartel Office (FCO) announced on Monday that the software giant could face restrictions if the competition authority determines that intervention is necessary.

This designation, which lasts for five years, is significant as it allows the German authority to closely monitor how Microsoft exerts its influence, particularly in relation to generative AI.

However, the regulator stated that it has not yet made any decisions regarding “possible proceedings.”

In recent years, Microsoft's influence over OpenAI has drawn the attention of antitrust regulators. Their close relationship even led Microsoft to briefly hire OpenAI frontman Sam Altman and other key personnel last fall during a board dispute.

Although Altman ultimately remained at OpenAI, this incident highlighted the strong ties between the two companies, with Microsoft even securing a board observer seat at OpenAI (which it relinquished this summer). Nonetheless, careful structuring of their arrangement seems to have allowed it to continue operating without major issues for the time being.

The FCO has already investigated the partnership between the two companies, concluding last November that their relationship did not meet the criteria for a traditional merger review. However, with the regulator now equipped with more proactive and extensive powers to regulate Big Tech, Microsoft’s interactions with OpenAI may be subject to increased scrutiny in Germany moving forward.

The FCO’s press release emphasizes that Microsoft’s Copilot AI assistant is utilized “in many parts” of its ecosystem. It also connects the company’s strength in cloud computing to its ability to forge partnerships with “highly innovative suppliers,” as it can “offer their AI models as services on Azure and integrate them into its own products.”

In a statement, Andreas Mundt, president of the FCO, emphasized Microsoft's long-standing dominance in software, noting: “Today, Microsoft’s ecosystem is stronger and more closely interconnected than ever before, due to the increasing reliance on cloud and AI technologies, in which Microsoft has consolidated its strong position by developing its own products and forming partnerships.”

The FCO began investigating whether Microsoft’s market power warranted the special abuse controls regime in March 2023. This confirmation of the company’s “paramount significance for competition across markets” activates a range of powers outlined in the 2021 update to Germany’s antitrust laws. This reform aims to address concerns that the market power of Big Tech is hindering rivals' ability to innovate and compete.

The German law already applies to companies like Amazon, Apple, Google, and Meta, and predates the European Union’s Digital Markets Act (DMA), a similar regulatory measure aimed at restraining Big Tech’s influence.

However, while the DMA applies operational controls solely to named platforms, the FCO has designated Microsoft as a whole. This gives the German authority broader latitude to impose regulations on Microsoft’s activities, particularly concerning AI, if it determines that the company’s actions are limiting competition.

The EU’s DMA was drafted before the surge in generative AI tools made ChatGPT widely recognized. Microsoft is classified as a gatekeeper, but only two of its platforms—Windows and LinkedIn—are directly regulated, which restricts the European Commission's ability to intervene in Microsoft’s AI-related activities unless they specifically pertain to these two “core platform services.”

“Our decision encompasses Microsoft as a whole, rather than just individual services or products,” Mundt highlighted. “This allows us to address anti-competitive practices that are not covered by the DMA.”

In response, Microsoft spokeswoman Sophie Thomas stated via email: “We acknowledge our responsibility to foster a healthy competitive environment and are committed to being proactive, collaborative, and responsible in our engagement with the Bundeskartellamt [FCO]. Microsoft is partnering with Germany’s most innovative companies, and we are dedicated to investing in the growth of its digital economy.”