The EU has warned Microsoft of potential billion-dollar fines for not providing crucial information on GenAI risks

The European Union has issued a warning to Microsoft regarding potential fines of up to 1% of its global annual turnover under the Digital Services Act (DSA). This warning comes after Microsoft failed to comply with a legally binding request for information (RFI) related to its generative AI tools.

The EU's strict online governance regime aims to ensure transparency and accountability in the use of AI technologies, and Microsoft's non-compliance with the RFI could result in significant financial penalties. It is essential for companies operating within the EU to adhere to regulatory requirements and cooperate with authorities to avoid potential sanctions.

In March, the European Union requested information from Microsoft and several other tech giants regarding the systemic risks associated with generative AI tools. However, on Friday, the Commission announced that Microsoft had failed to provide some of the requested documents. This lack of compliance with the EU's inquiry into the potential risks of generative AI tools could lead to further scrutiny and potential penalties under the Digital Services Act. It is crucial for companies to cooperate with regulatory authorities and provide the necessary information to ensure transparency and accountability in the use of AI technologies.

The European Commission has set a deadline of May 27 for Microsoft to provide the requested data or face potential enforcement actions. Under the Digital Services Act (DSA), fines can escalate to 6% of a company's global annual revenue. However, in cases where incorrect, incomplete, or misleading information is provided in response to a formal Request for Information (RFI), a standalone fine of 1% may be imposed.

In Microsoft's scenario, with reported revenue of $211.92 billion in the fiscal year ending June 30, 2023, this could potentially result in a penalty amounting to several billion dollars. It is essential for Microsoft to comply with the EU's requirements and provide accurate and complete information to avoid such significant financial consequences.The oversight of larger platforms' systemic risk obligations under the Digital Services Act (DSA) falls under the purview of the European Commission itself. This warning to Microsoft regarding its failure to produce requested data is just one element of a comprehensive enforcement toolbox at the Commission's disposal.

The potential enforcement options available to the Commission could prove to be far costlier for Microsoft than any reputational damage incurred from non-compliance with the data request. It is crucial for Microsoft to address the Commission's concerns promptly and fully cooperate to mitigate the risk of facing severe penalties under the DSA. The European Commission has specified that it is lacking information concerning the risks associated with the generative AI features of the search engine Bing. In particular, the regulator has pointed out the AI assistant "Copilot in Bing" and the image generation tool "Image Creator by Designer" as areas where information is missing.

The EU has expressed particular concern about the potential risks these tools may pose to civic discourse and electoral processes. It is essential for Microsoft to address these concerns and provide the necessary information to ensure transparency and accountability in the use of these generative AI features within Bing.The European Commission has set a deadline of May 27 for Microsoft to furnish the missing information related to the risks associated with Bing's generative AI features. Failure to comply by this deadline could result in a fine of 1% of Microsoft's annual revenue.

Additionally, if the company continues to be non-compliant, the Commission may impose "periodic penalties" of up to 5% of Microsoft's average daily income or worldwide annual turnover. It is crucial for Microsoft to meet the Commission's requirements and provide the necessary data to avoid facing further financial penalties under the Digital Services Act.

Under the Digital Services Act (DSA), designated services such as Bing are required to conduct thorough risk assessments and implement appropriate risk mitigation measures as outlined in Articles 34 and 35 of the DSA. Generative AI has been identified as one of the risks by the Commission, particularly in relation to the integrity of electoral processes, including the upcoming elections to the European Parliament in June. It is imperative for Microsoft to adhere to these guidelines and take the necessary steps to address the risks associated with its generative AI features within Bing.

As of now, Microsoft has not provided a response to the request for comment regarding the missing information and potential penalties under the DSA. It is essential for Microsoft to engage with the Commission and address the concerns raised promptly to ensure compliance with regulatory requirements and mitigate any potential risks to civic discourse and electoral processes.