And perhaps in a nod to Meta’s recent changes, Mastodon also vowed to “invest deeply in trust and safety” and ensure “everyone, especially marginalized communities,” feels “safe” on the platform.
To become a more user-focused paradise of “resilient, governable, open and safe digital spaces,” Mastodon is going to need a lot more funding. The blog called for donations to help fund an annual operating budget of $5.1 million (5 million euros) in 2025. That’s a massive leap from the $152,476 (149,400 euros) total operating expenses Mastodon reported in 2023.
Other social networks wary of EU regulations
Mastodon has decided to continue basing its operations in Europe, while still maintaining a separate US-based nonprofit entity as a “fundraising hub,” the blog said.
It will take time, Mastodon said, to “select the appropriate jurisdiction and structure in Europe” before Mastodon can then “determine which other (subsidiary) legal structures are needed to support operations and sustainability.”
While Mastodon is carefully getting re-settled as a nonprofit in Europe, Zuckerberg this week went on Joe Rogan’s podcast to call on Donald Trump to help US tech companies fight European Union fines, Politico reported.
Experts told France24 that EU officials may “perhaps wrongly” already be fearful about ruffling Trump’s feathers by targeting his tech allies and would likely need to use the “full legal arsenal” of EU digital laws to “stand up to Big Tech” once Trump’s next term starts.
As Big Tech prepares to continue battling EU regulators, Mastodon appears to be taking a different route, laying roots in Europe and “establishing the appropriate governance and leadership frameworks that reflect the nature and purpose of Mastodon as a whole” and “responsibly serve the community,” its blog said.
“Our core mission remains the same: to create the tools and digital spaces where people can build authentic, constructive online communities free from ads, data exploitation, manipulative algorithms, or corporate monopolies,” Mastodon’s blog said.
The estimated 10 billion-plus euro cost of the IRIS² program is nearly double initial projections. European officials also confirmed the sovereign satellite network won’t begin providing services to European government customers until 2030, three years later than the commission’s previous schedule.
Rising costs and negotiations over how much governments and industry will pay for IRIS² have delayed the contract award for months. Earlier this year, press reports indicated the SpaceRISE consortium’s proposal for IRIS² carried a total cost of 12 billion euros. It seems the price has been negotiated down, at least by a small percentage, to around 10 billion.
It’s also worth noting that the EU will this year only commit to funding the IRIS² initiative through the end 0f 2027, when the commission’s seven-year budget framework expires. It’s almost certain the IRIS² program will require more government funding beyond 2027, but the European Commission said it will decide later on additional money, subject to the “availability of the corresponding appropriations.”
In April, a senior official in the German government, the EU’s top contributor, called for the IRIS² program to be restarted. Robert Habeck, Germany’s economy minister, called the proposed 12 billion euro price “exorbitant” and said the entire project was “ill-conceived” in a letter to Thierry Breton, then the EU’s internal market commissioner, according to a report in the Germany newspaper Handelsblatt.
Habeck’s protest obviously did not stop the European Commission from awarding the contract to the SpaceRISE consortium. The 12-year agreement will cover the development, deployment, and operation of at least 290 satellites placed at different orbital altitudes, from low-Earth orbit up to medium-Earth orbit several thousand miles above the planet.
At these higher altitudes, IRIS² can cover the globe with fewer satellites than Starlink, OneWeb, or Amazon Kuiper.
The commission’s press release said the agreement, the largest space contract in EU history, should be signed in December. At that time, “legal and financial commitment from both parties will be taken,” the commission said.
The SpaceRISE consortium includes numerous European satellite and telecom companies, including spacecraft manufacturers Airbus Defence and Space, Thales Alenia Space, and OHB. Telespazio, Deutsche Telekom, Orange, Hisdesat, and Thales SIX are also part of the industry group.
These companies are typically competitors in the satellite and telecom markets, as are SES, Eutelsat, and Hispasat, which head up the consortium. Getting all the contractors and subcontractors to play nice with one another will be no small feat.
On Monday, Microsoft came out guns blazing, posting a blog accusing Google of “dishonestly” funding groups conducting allegedly biased studies to discredit Microsoft and mislead antitrust enforcers and the public.
In the blog, Microsoft lawyer Rima Alaily alleged that an astroturf group called the Open Cloud Coalition will launch this week and will appear to be led by “a handful of European cloud providers.” In actuality, however, those smaller companies were secretly recruited by Google, which allegedly pays them “to serve as the public face” and “obfuscate” Google’s involvement, Microsoft’s blog said. In return, Google likely offered the cloud providers cash or discounts to join, Alaily alleged.
The Open Cloud Coalition is just one part of a “pattern of shadowy campaigns” that Google has funded, both “directly and indirectly,” to muddy the antitrust waters, Alaily alleged. The only other named example that Alaily gives while documenting this supposed pattern is the US-based Coalition for Fair Software Licensing (CFSL), which Alaily said has attacked Microsoft’s cloud computing business in the US, the United Kingdom, and the European Union.
That group is led by Ryan Triplette, who Alaily said is “a well-known lobbyist for Google in Washington, DC, but Google’s affiliation isn’t disclosed publicly by the organization.” An online search confirms Triplette was formerly a lobbyist for Franklin Square Group, which Politico reported represented Google during her time there.
Ars could not immediately reach the CFSL for comment. Google’s spokesperson told Ars that the company has “been a public supporter of CFSL for more than two years” and has “no idea what evidence Microsoft cites that we are the main funder of CFSL.” If Triplette was previously a lobbyist for Google, the spokesperson said, “that’s a weird criticism to make” since it’s likely “everybody in law, policy, etc.,” has “worked for Google, Microsoft, or Amazon at some point, in some capacity.”
Following an investigation, Elon Musk’s X has won its fight to avoid gatekeeper status under the European Union’s strict competition law, the Digital Markets Act (DMA).
On Wednesday, the European Commission (EC) announced that “X does indeed not qualify as a gatekeeper in relation to its online social networking service, given that the investigation revealed that X is not an important gateway for business users to reach end users.”
Since March, X had strongly opposed the gatekeeper designation by arguing that although X connects advertisers to more than 45 million monthly users, it does not have a “significant impact” on the EU’s internal market, a case filing showed.
A gatekeeper “is presumed to have a significant impact on the internal market where it achieves an annual Union turnover equal to or above EUR 7.5 billion in each of the last three financial years,” the case filing said. But X submitted evidence showing that its Union turnover was less than that in 2022, the same year that Musk took over Twitter and began alienating advertisers by posting their ads next to extremists’ tweets.
Throughout Musk’s reign at Twitter/X, the social networking company told the EC, both advertising revenue and users have steadily declined in the EU. In particular, “X Ads has a too small and decreasing scale in terms of share of advertising spend in the Union to constitute an important gateway in the market for online advertising,” X argued, further noting that X had a “lack of platform power” to change that anytime soon.
“In the last 15 months, X Ads has faced a decline in number of advertising business users, as well as a decline in pricing,” X argued.
According to the Dutch Data Protection Authority (DPA), Clearview AI “built an illegal database with billions of photos of faces” by crawling the web and without gaining consent, including from people in the Netherlands.
Clearview AI’s technology—which has been banned in some US cities over concerns that it gives law enforcement unlimited power to track people in their daily lives—works by pulling in more than 40 billion face images from the web without setting “any limitations in terms of geographical location or nationality,” the Dutch DPA found. Perhaps most concerning, the Dutch DPA said, Clearview AI also provides “facial recognition software for identifying children,” therefore indiscriminately processing personal data of minors.
Training on the face image data, the technology then makes it possible to upload a photo of anyone and search for matches on the Internet. People appearing in search results, the Dutch DPA found, can be “unambiguously” identified. Billed as a public safety resource accessible only by law enforcement, Clearview AI’s face database casts too wide a net, the Dutch DPA said, with the majority of people pulled into the tool likely never becoming subject to a police search.
“The processing of personal data is not only complex and extensive, it moreover offers Clearview’s clients the opportunity to go through data about individual persons and obtain a detailed picture of the lives of these individual persons,” the Dutch DPA said. “These processing operations therefore are highly invasive for data subjects.”
Clearview AI had no legitimate interest under the European Union’s General Data Protection Regulation (GDPR) for the company’s invasive data collection, Dutch DPA Chairman Aleid Wolfsen said in a press release. The Dutch official likened Clearview AI’s sprawling overreach to “a doom scenario from a scary film,” while emphasizing in his decision that Clearview AI has not only stopped responding to any requests to access or remove data from citizens in the Netherlands, but across the EU.
“Facial recognition is a highly intrusive technology that you cannot simply unleash on anyone in the world,” Wolfsen said. “If there is a photo of you on the Internet—and doesn’t that apply to all of us?—then you can end up in the database of Clearview and be tracked.”
To protect Dutch citizens’ privacy, the Dutch DPA imposed a roughly $33 million fine that could go up by about $5.5 million if Clearview AI does not follow orders on compliance. Any Dutch businesses attempting to use Clearview AI services could also face “hefty fines,” the Dutch DPA warned, as that “is also prohibited” under the GDPR.
Clearview AI was given three months to appoint a representative in the EU to stop processing personal data—including sensitive biometric data—in the Netherlands and to update its privacy policies to inform users in the Netherlands of their rights under the GDPR. But the company only has one month to resume processing requests for data access or removals from people in the Netherlands who otherwise find it “impossible” to exercise their rights to privacy, the Dutch DPA’s decision said.
It appears that Clearview AI has no intentions to comply, however. Jack Mulcaire, the chief legal officer for Clearview AI, confirmed to Ars that the company maintains that it is not subject to the GDPR.
“Clearview AI does not have a place of business in the Netherlands or the EU, it does not have any customers in the Netherlands or the EU, and does not undertake any activities that would otherwise mean it is subject to the GDPR,” Mulcaire said. “This decision is unlawful, devoid of due process and is unenforceable.”
But the Dutch DPA found that GDPR applies to Clearview AI because it gathers personal information about Dutch citizens without their consent and without ever alerting users to the data collection at any point.
“People who are in the database also have the right to access their data,” the Dutch DPA said. “This means that Clearview has to show people which data the company has about them, if they ask for this. But Clearview does not cooperate in requests for access.”
Dutch DPA vows to investigate Clearview AI execs
In the press release, Wolfsen said that the Dutch DPA has “to draw a very clear line” underscoring the “incorrect use of this sort of technology” after Clearview AI refused to change its data collection practices following fines in other parts of the European Union, including Italy and Greece.
While Wolfsen acknowledged that Clearview AI could be used to enhance police investigations, he said that the technology would be more appropriate if it was being managed by law enforcement “in highly exceptional cases only” and not indiscriminately by a private company.
“The company should never have built the database and is insufficiently transparent,” the Dutch DPA said.
Although Clearview AI appears ready to defend against the fine, the Dutch DPA said that the company failed to object to the decision within the provided six-week timeframe and therefore cannot appeal the decision.
Further, the Dutch DPA confirmed that authorities are “looking for ways to make sure that Clearview stops the violations” beyond the fines, including by “investigating if the directors of the company can be held personally responsible for the violations.”
Wolfsen claimed that such “liability already exists if directors know that the GDPR is being violated, have the authority to stop that, but omit to do so, and in this way consciously accept those violations.”
Surprisingly, this step wasn’t taken under laws like the Digital Services Act (DSA), the Digital Markets Act (DMA), or the General Data Protection Regulation (GDPR).
Instead, the EC announced Monday that Meta risked sanctions under EU consumer laws if it could not resolve key concerns about Meta’s so-called “pay or consent” model.
Meta’s model is seemingly problematic, the commission said, because Meta “requested consumers overnight to either subscribe to use Facebook and Instagram against a fee or to consent to Meta’s use of their personal data to be shown personalized ads, allowing Meta to make revenue out of it.”
Because users were given such short notice, they may have been “exposed to undue pressure to choose rapidly between the two models, fearing that they would instantly lose access to their accounts and their network of contacts,” the EC said.
To protect consumers, the EC joined national consumer protection authorities, sending a letter to Meta requiring the tech giant to propose solutions to resolve the commission’s biggest concerns by September 1.
That Meta’s “pay or consent” model may be “misleading” is a top concern because it uses the term “free” for ad-based plans, even though Meta “can make revenue from using their personal data to show them personalized ads.” It seems that while Meta does not consider giving away personal information to be a cost to users, the EC’s commissioner for justice, Didier Reynders, apparently does.
“Consumers must not be lured into believing that they would either pay and not be shown any ads anymore, or receive a service for free, when, instead, they would agree that the company used their personal data to make revenue with ads,” Reynders said. “EU consumer protection law is clear in this respect. Traders must inform consumers upfront and in a fully transparent manner on how they use their personal data. This is a fundamental right that we will protect.”
Additionally, the EC is concerned that Meta users might be confused about how “to navigate through different screens in the Facebook/Instagram app or web-version and to click on hyperlinks directing them to different parts of the Terms of Service or Privacy Policy to find out how their preferences, personal data, and user-generated data will be used by Meta to show them personalized ads.” They may also find Meta’s “imprecise terms and language” confusing, such as Meta referring to “your info” instead of clearly referring to consumers’ “personal data.”
To resolve the EC’s concerns, Meta may have to give EU users more time to decide if they want to pay to subscribe or consent to personal data collection for targeted ads. Or Meta may have to take more drastic steps by altering language and screens used when securing consent to collect data or potentially even scrapping its “pay or consent” model entirely, as pressure in the EU mounts.
“Subscriptions as an alternative to advertising are a well-established business model across many industries,” Meta’s spokesperson told Ars. “Subscription for no ads follows the direction of the highest court in Europe and we are confident it complies with European regulation.”
Meta’s model is “sneaky,” EC said
Since last year, the social media company has argued that its “subscription for no ads” model was “endorsed” by the highest court in Europe, the Court of Justice of the European Union (CJEU).
However, privacy advocates have noted that this alleged endorsement came following a CJEU case under the GDPR and was only presented as a hypothetical, rather than a formal part of the ruling, as Meta seems to interpret.
What the CJEU said was that “users must be free to refuse individually”—”in the context of” signing up for services—”to give their consent to particular data processing operations not necessary” for Meta to provide such services “without being obliged to refrain entirely from using the service.” That “means that those users are to be offered, if necessary for an appropriate fee, an equivalent alternative not accompanied by such data processing operations,” the CJEU said.
The nuance here may matter when it comes to Meta’s proposed solutions even if the EC accepts the CJEU’s suggestion of an acceptable alternative as setting some sort of legal precedent. Because the consumer protection authorities raised the action due to Meta suddenly changing the consent model for existing users—not “in the context of” signing up for services—Meta may struggle to persuade the EC that existing users weren’t misled and pressured into paying for a subscription or consenting to ads, given how fast Meta’s policy shifted.
Meta risks sanctions if a compromise can’t be reached, the EC said. Under the EU’s Unfair Contract Terms Directive, for example, Meta could be fined up to 4 percent of its annual turnover if consumer protection authorities are unsatisfied with Meta’s proposed solutions.
The EC’s vice president for values and transparency, Věra Jourová, provided a statement in the press release, calling Meta’s abrupt introduction of the “pay or consent” model “sneaky.”
“We are proud of our strong consumer protection laws which empower Europeans to have the right to be accurately informed about changes such as the one proposed by Meta,” Jourová said. “In the EU, consumers are able to make truly informed choices and we now take action to safeguard this right.”
According to Bloomberg, Google’s offer to the Cloud Infrastructure Services Providers in Europe (CISPE) required that the group maintain its EU antitrust complaint. It came “just days” before CISPE settled with Microsoft, and it was apparently not compelling enough to stop CISPE from inking a deal with the software giant that TechCrunch noted forced CISPE to accept several compromises.
Bloomberg uncovered Google’s attempted counteroffer after reviewing confidential documents and speaking to “people familiar with the matter.” Apparently, Google sought to sway CISPE with a package worth nearly $500 million for more than five years of software licenses and about $15 million in cash.
But CISPE did not take the bait, announcing last week that an agreement was reached with Microsoft, seemingly frustrating Google.
CISPE initially raised its complaint in 2022, alleging that Microsoft was “irreparably damaging the European cloud ecosystem and depriving European customers of choice in their cloud deployments” by spiking costs to run Microsoft’s software on rival cloud services. In February, CISPE said that “any remedies and resolution must apply across the sector and to be accessible to all cloud customers in Europe.” They also promised that “any agreements will be made public.”
But the settlement reached last week excluded major rivals, including Amazon, which is a CISPE member, and Google, which is not. And despite CISPE’s promise, the terms of the deal were not published, apart from a CISPE blog roughly outlining central features that it claimed resolved the group’s concerns over Microsoft’s allegedly anticompetitive behaviors.
What is clear is that CISPE agreed to drop their complaint by taking the deal, but no one knows exactly how much Microsoft paid in a “lump sum” to cover CISPE legal fees for three years, TechCrunch noted. However, “two people with direct knowledge of the matter” told Reuters that Microsoft offered about $22 million.
Google has been trying to catch up with Microsoft and Amazon in the cloud market and has recently begun gaining ground. Last year, Google’s cloud operation broke even for the first time, and the company earned a surprising $900 million in profits in the first quarter of 2024, which bested analysts’ projections by more than $200 million, Bloomberg reported. For Google, the global cloud market has become a key growth area, Bloomberg noted, as potential growth opportunities in search advertising slow. Seemingly increasing regulatory pressure on Microsoft while taking a chunk of its business in the EU was supposed to be one of Google’s next big moves.
A CISPE spokesperson, Ben Maynard, told Ars that its “members were presented with alternative options to accepting the Microsoft deal,” while not disclosing the terms of the other options. “However, the members voted by a significant majority to accept the Microsoft offer, which, in their view, presented the best opportunity for the European cloud sector,” Maynard told Ars.
Neither Microsoft nor Google has commented directly on the reported counteroffer. A Google spokesperson told Bloomberg that Google “has long supported the principles of fair software licensing and that the firm was having discussions about joining CISPE, to fight anticompetitive licensing practices.” A person familiar with the matter told Ars that Google did not necessarily make the counteroffer contingent on dropping the EU complaint, but had long been exploring joining CISPE and would only do so if CISPE upheld its mission to defend fair licensing deals. Microsoft reiterated a past statement from its president, Brad Smith, confirming that Microsoft was “pleased” to resolve CISPE’s antitrust complaint.
For CISPE, the resolution may not have been perfect, but it “will enable European cloud providers to offer Microsoft applications and services on their local cloud infrastructures, meeting the demand for sovereign cloud solutions.” In 2022, CISPE Secretary-General Francisco Mingorance told Ars that although CISPE had been clear that it intended to force Microsoft to make changes allowing all cloud rivals to compete, “a key reason behind filing the complaint was to support” two smaller cloud service providers, Aruba and OVH.
In two weeks, iPhone users in the European Union will be able to use any mobile wallet they like to complete “tap and go” payments with the ease of using Apple Pay.
The change comes as part of a settlement with the European Commission (EC), which investigated Apple for potentially shutting out rivals by denying access to the “Near Field Communication” (NFC) technology on its devices that enables the “tap and go” feature. Apple did not develop this technology, which is free for developers, the EC said, and going forward, Apple agreed to not charge developers fees to provide the NFC functionality on its devices.
In a press release, the EC’s executive vice president, Margrethe Vestager, said that Apple’s commitments in the settlement address the commission’s “preliminary concerns that Apple may have illegally restricted competition for mobile wallets on iPhones.”
“From now on, Apple can no longer use its control over the iPhone ecosystem to keep other mobile wallets out of the market,” Vestager said. “Competing wallet developers, as well as consumers, will benefit from these changes, opening up innovation and choice, while keeping payments secure.”
Apple has until July 25 to follow through on three commitments that resolve the EC’s concerns that Apple may have “prevented developers from bringing new and competing mobile wallets to iPhone users.”
Arguably, providing outside developers access to NFC functionality on its devices is the biggest change. Rather than allowing developers to access this functionality through Apple’s hardware, Apple has borrowed a solution prevalent in the Android ecosystem, Vestager said, granting access through a software solution called “Host Card Emulation mode.”
This, Vestager said, provides “an equivalent solution in terms of security and user experience” and paves the way for other wallets to be more easily used on Apple devices.
An Apple spokesperson told CNBC that “Apple is providing developers in the European Economic Area with an option to enable NFC contactless payments and contactless transactions for car keys, closed loop transit, corporate badges, home keys, hotel keys, merchant loyalty/rewards, and event tickets from within their iOS apps using Host Card Emulation based APIs.”
To ensure that Apple Pay is on an equal playing field with other wallets, the EC said that Apple committed to improve contactless payments functionality for rival wallets. That means that “iPhone users will be able to double-click the side button of their iPhones to launch” their preferred wallet and “use Face ID, Touch ID and passcode to verify” their identities when using competing wallets.
Perhaps most critically for users attracted to Apple’s payment options convenience, Apple also agreed to allow rival wallets to be set as the default payment option.
These commitments will remain in force for 10 years, Vestager said.
Apple did not immediately respond to Ars’ request for comment. Apple’s spokesperson confirmed to CNBC that no changes would be made to Apple Pay or Apple Wallet as a result of the settlement.
Apple’s commitments go beyond the DMA
Before accepting Apple’s commitments, the EC spoke to “many banks, app developers, card issuers, and financial associations,” Vestager said, whose feedback helped improve Apple’s commitments.
According to Vestager, Apple’s changes go beyond the requirements of the EU’s strict antitrust law, the Digital Markets Act, which “requires gatekeepers to ensure effective interoperability with hardware and software features that they use within their ecosystems,” including “access to NFC technology for mobile payments.”
Beyond the DMA, Apple agreed to have its compliance with the settlement “ensured by a monitoring trustee,” as well as to provide “a fast dispute resolution mechanism, which will also allow for an independent review of Apple’s implementation.”
Vestager assured all stakeholders in the European Economic Area that these changes will prevent any potential harms caused by Apple seeming to shut other wallets out of its devices, which “may have had a negative impact on innovation.” By settling the yearslong probe, Apple avoided a potentially large fine. In March, the EC fined Apple nearly $2 billion for restricting “alternative and cheaper music subscription services” like Spotify in its app store, and the suspected anticompetitive behavior in Apple’s payments ecosystem seemed just as harmful, the EC found.
“This reduction in choice and innovation is harmful,” Vestager said, confirming that the settlement concluded the EC’s probe into Apple Pay. “It is harmful to consumers and it is illegal under EU competition rules.”
Meta continues to hit walls with its heavily scrutinized plan to comply with the European Union’s strict online competition law, the Digital Markets Act (DMA), by offering Facebook and Instagram subscriptions as an alternative for privacy-inclined users who want to opt out of ad targeting.
Today, the European Commission (EC) announced preliminary findings that Meta’s so-called “pay or consent” or “pay or OK” model—which gives users a choice to either pay for access to its platforms or give consent to collect user data to target ads—is not compliant with the DMA.
According to the EC, Meta’s advertising model violates the DMA in two ways. First, it “does not allow users to opt for a service that uses less of their personal data but is otherwise equivalent to the ‘personalized ads-based service.” And second, it “does not allow users to exercise their right to freely consent to the combination of their personal data,” the press release said.
Now, Meta will have a chance to review the EC’s evidence and defend its policy, with today’s findings kicking off a process that will take months. The EC’s investigation is expected to conclude next March. Thierry Breton, the commissioner for the internal market, said in the press release that the preliminary findings represent “another important step” to ensure Meta’s full compliance with the DMA.
“The DMA is there to give back to the users the power to decide how their data is used and ensure innovative companies can compete on equal footing with tech giants on data access,” Breton said.
A Meta spokesperson told Ars that Meta plans to fight the findings—which could trigger fines up to 10 percent of the company’s worldwide turnover, as well as fines up to 20 percent for repeat infringement if Meta loses.
Meta continues to claim that its “subscription for no ads” model was “endorsed” by the highest court in Europe, the Court of Justice of the European Union (CJEU), last year.
“Subscription for no ads follows the direction of the highest court in Europe and complies with the DMA,” Meta’s spokesperson said. “We look forward to further constructive dialogue with the European Commission to bring this investigation to a close.”
However, some critics have noted that the supposed endorsement was not an official part of the ruling and that particular case was not regarding DMA compliance.
The EC agreed that more talks were needed, writing in the press release, “the Commission continues its constructive engagement with Meta to identify a satisfactory path towards effective compliance.”
Enlarge/ EU competition chief Margrethe Vestager said the bloc was looking into practices that could in effect lead to a company controlling a greater share of the AI market.
Brussels is preparing for an antitrust investigation into Microsoft’s $13 billion investment into OpenAI, after the European Union decided not to proceed with a merger review into the most powerful alliance in the artificial intelligence industry.
The European Commission, the EU’s executive arm, began to explore a review under merger control rules in January, but on Friday announced that it would not proceed due to a lack of evidence that Microsoft controls OpenAI.
However, the commission said it was now exploring the possibility of a traditional antitrust investigation into whether the tie-up between the world’s most valuable listed company and the best-funded AI start-up was harming competition in the fast-growing market.
The commission has also made inquiries about Google’s deal with Samsung to install a modified version of its Gemini AI system in the South Korean manufacturer’s smartphones, it revealed on Friday.
Margrethe Vestager, the bloc’s competition chief, said in a speech on Friday: “The key question was whether Microsoft had acquired control on a lasting basis over OpenAI. After a thorough review we concluded that such was not the case. So we are closing this chapter, but the story is not over.”
She said the EU had sent a new set of questions to understand whether “certain exclusivity clauses” in the agreement between Microsoft and OpenAI “could have a negative effect on competitors.” The move is seen as a key step toward a formal antitrust probe.
The bloc had already sent questions to Microsoft and other tech companies in March to determine whether market concentration in AI could potentially block new companies from entering the market, Vestager said.
Microsoft said: “We appreciate the European Commission’s thorough review and its conclusion that Microsoft’s investment and partnership with OpenAI does not give Microsoft control over the company.”
Brussels began examining Microsoft’s relationship with the ChatGPT maker after OpenAI’s board abruptly dismissed its chief executive Sam Altman in November 2023, only to be rehired a few days later. He briefly joined Microsoft as the head of a new AI research unit, highlighting the close relationship between the two companies.
Regulators in the US and UK are also scrutinizing the alliance. Microsoft is the biggest backer of OpenAI, although its investment of up to $13 billion, which was expanded in January 2023, does not involve acquiring conventional equity due to the startup’s unusual corporate structure. Microsoft has a minority interest in OpenAI’s commercial subsidiary, which is owned by a not-for-profit organization.
Antitrust investigations tend to last years, compared with a much shorter period for merger reviews, and they focus on conduct that could be undermining rivals. Companies that are eventually found to be breaking the law, for example by bundling products or blocking competitors from access to key technology, risk hefty fines and legal obligations to change their behavior.
Vestager said the EU was looking into practices that could in effect lead to a company controlling a greater share of the AI market. She pointed to a practice called “acqui-hires,” where a company buys another one mainly to get its talent. For example, Microsoft recently struck a deal to hire most of the top team from AI start-up Inflection, in which it had previously invested. Inflection remains an independent company, however, complicating any traditional merger investigation.
The EU’s competition chief said regulators were also looking into the way big tech companies may be preventing smaller AI models from reaching users.
“This is why we are also sending requests for information to better understand the effects of Google’s arrangement with Samsung to pre-install its small model ‘Gemini nano’ on certain Samsung devices,” said Vestager.
Jonathan Kanter, the top US antitrust enforcer, told the Financial Times earlier this month that he was also examining “monopoly choke points and the competitive landscape” in AI. The UK’s Competition and Markets Authority said in December that it had “decided to investigate” the Microsoft-OpenAI deal when it invited comments from customers and rivals.
Enlarge/ A screen shows a virtual meeting with Microsoft Teams at a conference on January 30, 2024 in Barcelona, Spain.
Microsoft may be hit with a massive fine in the European Union for “possibly abusively” bundling Teams with its Office 365 and Microsoft 365 software suites for businesses.
On Tuesday, the European Commission (EC) announced preliminary findings of an investigation into whether Microsoft’s “suite-centric business model combining multiple types of software in a single offering” unfairly shut out rivals in the “software as a service” (SaaS) market.
“Since at least April 2019,” the EC found, Microsoft’s practice of “tying Teams with its core SaaS productivity applications” potentially restricted competition in the “market for communication and collaboration products.”
The EC is also “concerned” that the practice may have helped Microsoft defend its dominant market position by shutting out “competing suppliers of individual software” like Slack and German video-conferencing software Alfaview. Makers of those rival products had complained to the EC last year, setting off the ongoing probe into Microsoft’s bundling.
Customers should have choices, the EC said, and seemingly at every step, Microsoft sought instead to lock customers into using only its software.
“Microsoft may have granted Teams a distribution advantage by not giving customers the choice whether or not to acquire access to Teams when they subscribe to their SaaS productivity applications,” the EC wrote. This alleged abusive practice “may have been further exacerbated by interoperability limitations between Teams’ competitors and Microsoft’s offerings.”
For Microsoft, the EC’s findings are likely not entirely unexpected, although Tuesday’s announcement must be disappointing. The company had been hoping to avoid further scrutiny by introducing some major changes last year. Most drastically, Microsoft began “offering some suites without Teams,” the EC said, but even that wasn’t enough to appease EU regulators.
“The Commission preliminarily finds that these changes are insufficient to address its concerns and that more changes to Microsoft’s conduct are necessary to restore competition,” the EC said, concluding that “the conduct may have prevented Teams’ rivals from competing, and in turn innovating, to the detriment of customers in the European Economic Area.”
Microsoft will now be given an opportunity to defend its practices. If the company is unsuccessful, it risks a potential fine up to 10 percent of its annual worldwide turnover and an order possibly impacting how the leading global company conducts business.
In a statement to Ars, Microsoft President Brad Smith confirmed that the tech giant would work with the commission to figure out a better solution.
“Having unbundled Teams and taken initial interoperability steps, we appreciate the additional clarity provided today and will work to find solutions to address the commission’s remaining concerns,” Smith said.
The EC’s executive vice-president in charge of competition policy, Margrethe Vestager, explained in a statement why the commission refuses to back down from closely scrutinizing Microsoft’s alleged unfair practices.
“We are concerned that Microsoft may be giving its own communication product Teams an undue advantage over competitors by tying it to its popular productivity suites for businesses,” Vestager said. “And preserving competition for remote communication and collaboration tools is essential as it also fosters innovation” in these markets.
Changes coming to EU antitrust law in 2025
The EC initially launched its investigation into Microsoft’s allegedly abusive Teams bundling last July. Its probe came after Slack and Alfaview makers complained that Microsoft may be violating Article 102 of the Treaty on the Functioning of the European Union (TFEU), “which prohibits the abuse of a dominant market position.”
Nearly one year later, there’s no telling when the EC’s inquiry into Microsoft Teams will end. Microsoft will have a chance to review all evidence of infringement gathered by EU regulators to form its response. After that, the EC will review any additional evidence before making its decision, and there is no legal deadline to complete the antitrust inquiry, the EC said.
It’s possible that the EC’s decision may come next year when the EU is preparing to release new guidance to more “vigorously” and effectively enforce TFEU.
Last March, the EC called for stakeholder feedback after rolling out “the first major policy initiative in the area of abuse of dominance rules.” The initiative sought to update TFEU for the first time since 2008 based on reviewing relevant case law.
“A robust enforcement of rules on abuse of dominance benefits both consumers and a stronger European economy,” Vestager said at that time. “We have carefully analyzed numerous EU court judgments on the application of Article 102, and it is time for us to start working on guidelines reflecting this case law.”
Enlarge/ Features like Image Playground won’t arrive in Europe at the same time as other regions.
Apple
Three major features in iOS 18 and macOS Sequoia will not be available to European users this fall, Apple says. They include iPhone screen mirroring on the Mac, SharePlay screen sharing, and the entire Apple Intelligence suite of generative AI features.
In a statement sent to Financial Times, The Verge, and others, Apple says this decision is related to the European Union’s Digital Markets Act (DMA). Here’s the full statement, which was attributed to Apple spokesperson Fred Sainz:
Two weeks ago, Apple unveiled hundreds of new features that we are excited to bring to our users around the world. We are highly motivated to make these technologies accessible to all users. However, due to the regulatory uncertainties brought about by the Digital Markets Act (DMA), we do not believe that we will be able to roll out three of these features — iPhone Mirroring, SharePlay Screen Sharing enhancements, and Apple Intelligence — to our EU users this year.
Specifically, we are concerned that the interoperability requirements of the DMA could force us to compromise the integrity of our products in ways that risk user privacy and data security. We are committed to collaborating with the European Commission in an attempt to find a solution that would enable us to deliver these features to our EU customers without compromising their safety.
It is unclear from Apple’s statement precisely which aspects of the DMA may have led to this decision. It could be that Apple is concerned that it would be required to give competitors like Microsoft or Google access to user data collected for Apple Intelligence features and beyond, but we’re not sure.
This is not the first recent and major divergence between functionality and features for Apple devices in the EU versus other regions. Because of EU regulations, Apple opened up iOS to third-party app stores in Europe, but not in other regions. However, critics argued its compliance with that requirement was lukewarm at best, as it came with a set of restrictions and changes to how app developers could monetize their apps on the platform should they use those other storefronts.
While Apple says in the statement it’s open to finding a solution, no timeline is given. All we know is that the features won’t be available on devices in the EU this year. They’re expected to launch in other regions in the fall.
