The European Union (EU) has issued a warning to tech giant Microsoft, stating that the company could face a fine of up to 1% of its global annual turnover under the Digital Services Act (DSA). This comes after Microsoft failed to respond to a legally binding request for information (RFI) related to its generative AI tools.

In March, the EU had requested information from Microsoft and other tech giants regarding the systemic risks posed by generative AI tools. However, the Commission stated that Microsoft did not provide some of the requested documents. As a result, the company has until May 27 to supply the missing data or face potential enforcement measures.

Under the DSA, fines can reach up to 6% of global annual revenue. In the case of Microsoft, this could amount to a penalty of a couple of billion dollars, considering the company reported revenue of $211.92 billion in the fiscal year ended June 30, 2023. However, for providing incorrect, incomplete, or misleading information in response to an RFI, a standalone fine of 1% can be imposed.

The specific information that Microsoft failed to provide relates to the risks associated with the generative AI features of its search engine Bing. Notably, the EU expressed concerns about AI assistant "Copilot in Bing" and image generation tool "Image Creator by Designer." The EU is particularly worried about the potential 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 additional "periodic penalties" of up to 5% of the company's average daily income or worldwide annual turnover. As Bing has been designated as a "very large online search engine" (VLOSE) under the DSA, it is subject to additional obligations related to mitigating systemic risks such as disinformation.

Generative AI technologies, despite their flaws, have become increasingly embedded in mainstream platforms. Large language models (LLMs) can sometimes fabricate information while presenting it as fact. AI-powered image generation tools have also been known to produce biased or potentially harmful output, including misleading deepfakes.

With upcoming elections in the EU next month, the issue of AI-fueled political disinformation is gaining significant attention. The EU Commission stated that the request for information is based on the suspicion that Bing may have breached the DSA by not adequately addressing risks related to generative AI, including the viral dissemination of deepfakes and the automated manipulation of services that can mislead voters.

In response to the EU's warning, a Microsoft spokesperson emphasized the company's commitment to creating safe online experiences and working with regulators on this important matter. Microsoft stated that it has been fully cooperating with the European Commission's voluntary request for information and is dedicated to responding to their questions. The company also expressed its proactive measures to prepare its tools for the 2024 elections and collaborate with industry peers through the Tech Accord to Combat Deceptive Use of AI.

It remains to be seen how Microsoft will address the EU's concerns and if it will provide the requested data by the given deadline. The outcome of this situation will not only impact Microsoft's financial standing but also shed light on the EU's efforts to regulate and mitigate the risks posed by generative AI tools in the digital landscape.