UPDATE 5-Microsoft-OpenAI deal set to dodge formal EU merger probe, sources say

(Adds comments from EU)

By Foo Yun Chee and Yuvraj Malik

April 17 (Reuters) - EU antitrust regulators have concluded that Microsoft's $13 billion investment into OpenAI is not an acquisition, sources familiar with the matter said on Wednesday, signaling the deal will avoid a formal European probe that could have led to onerous remedies for the U.S. tech giant.

EU regulators had said in January that the deal may be subject to merger rules in the region. Microsoft, which has a non-voting position on OpenAI board, said late last year it did not own any portion of the ChatGPT maker.

But Microsoft is not out of the woods yet, with the EU competition enforcer still looking into partnerships between large digital market players and generative AI developers and providers that could lead to intrusive and lengthy investigations in their market power.

"The Commission had been following very closely the situation of control over OpenAI before the recent events involving its management," an EU spokesperson said in an email to Reuters.

"We are checking whether Microsoft's investment in OpenAI might be reviewable under the EU Merger Regulation."

Microsoft declined to comment, while OpenAI did not immediately respond to Reuters requests for comment.

The Microsoft-OpenAI partnership is also under informal scrutiny in other regions.

UK's Competition and Markets Authority is reviewing whether to launch a probe to see if the deal affects competition among British firms, while the U.S. Justice Department and the Federal Trade Commission are reportedly considering an investigation.

To avoid such probes, Microsoft is actively scouting partnerships with other AI firms. Earlier this year, it announced a pact with French startup Mistral AI.

Bloomberg News first reported the development on Wednesday. (Reporting by Yuvraj Malik in Bengaluru and Foo Yun Chee in Brussels; Editing by Shilpi Majumdar and Shailesh Kuber)