The European Union has cautioned Microsoft (NASDAQ:MSFT) that it faces potential fines of up to 1% of its global annual turnover under the bloc’s Digital Services Act (DSA). This warning comes after Microsoft allegedly failed to respond to a request for information (RFI) regarding its generative AI tools.
In March, the EU requested information from Microsoft and other tech giants about systemic risks associated with generative AI tools. On Friday, the Commission stated that Microsoft did not provide all the requested documents. However, an updated version of the Commission’s press release amended the language, removing an earlier assertion that Microsoft did not respond. Instead, the revised version indicates that the EU is escalating enforcement action “following an initial request for information.”
Microsoft has until May 27 to furnish the requested data or face potential enforcement measures. Penalties under the DSA can reach up to 6% of global annual revenue, with incorrect or incomplete information provided in response to an RFI potentially resulting in a standalone fine of 1%. For Microsoft, this could translate into a penalty of several billion dollars, considering the company reported revenue of $211.92 billion in the fiscal year ended June 30, 2023.
The Commission expressed concerns about potential risks associated with Bing’s generative AI features, particularly highlighting the AI assistant “Copilot in Bing” and the image generation tool “Image Creator by Designer.” Of particular worry are any risks these tools may pose to civic discourse and electoral processes.
If Microsoft fails to provide the missing information by May 27, the Commission may impose fines of 1% of annual revenue and “periodic penalties” of up to 5% of its average daily income or worldwide annual turnover.
Bing was classified as a “very large online search engine” (VLOSE) under the DSA in April 2023, subjecting it to additional obligations related to mitigating systemic risks like disinformation.
The EU’s focus on generative AI technologies is intensified by concerns over their potential to spread disinformation, including deepfakes. With an upcoming election in June, the EU is particularly attentive to AI-fueled political disinformation.
In response, Microsoft stated its commitment to creating safe online experiences and collaborating with regulators on digital safety and compliance with the DSA. The company emphasized its cooperation with the European Commission’s request for information and pledged to share more about its approach to digital safety. Additionally, Microsoft highlighted its efforts to prepare its tools for the 2024 elections and collaborate with industry peers to combat deceptive AI use.
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