IP Law Daily, AI NEWS: ChatGPT subscribers file antitrust class action against Microsoft over OpenAI Compute exclusivity agreement, (Oct 17, 2025)

By Wendy Biddle, J.D.

ChatGPT users allege Microsoft's exclusive cloud computing agreement with OpenAI artificially inflated prices.

Eleven individual ChatGPT subscribers filed a class action complaint in the Northern District of California on October 13, 2025, alleging that Microsoft Corporation violated federal and California antitrust laws through an exclusive computing agreement with its horizontal competitor OpenAI that artificially constrained supply and inflated prices in the Consumer Generative AI market. The 99-page complaint alleges that Microsoft leveraged its position as OpenAI's exclusive cloud computing provider to restrict output of OpenAI's ChatGPT products, thereby extracting supracompetitive prices from consumers while simultaneously developing and marketing its own competing Copilot product line (Bryant v. Microsoft Corp., No. 3:25-cv-08733 (N.D. Cal. Oct. 13, 2025)).

Microsoft-OpenAI relationship. According to the complaint, Microsoft's relationship with OpenAI began in July 2019 when Microsoft invested $1 billion in exchange for becoming OpenAI's exclusive cloud provider through its Azure platform. The agreement required OpenAI to purchase all computing resources exclusively from Microsoft Azure, with Microsoft taking a 20% revenue share from OpenAI's sales. By 2023, Microsoft had invested a total of $13 billion in OpenAI under this arrangement.

The complaint alleges this exclusivity provision gave Microsoft direct control over the computational capacity available to OpenAI, which is essential for both training AI models and processing user queries. The plaintiffs characterize this as a "compute restraint" that allowed Microsoft to throttle its competitors’ product output and quality while developing its own competing Consumer Generative AI products.

Microsoft's position as both OpenAI's primary investor and its direct competitor in the Consumer Generative AI market creates what plaintiffs describe as an inherent conflict of interest. The complaint notes that Microsoft incorporated OpenAI's technology into its Copilot products across its Office 365 suite, GitHub coding tools, and Bing search engine under the partnership agreement.

Market definition and alleged harm. The complaint defines the relevant market as the United States Consumer Generative AI Market, which it describes as a distinct submarket characterized by subscription-based access to large language models and multimodal AI systems accessed through consumer-facing interfaces. Market participants identified in the complaint include OpenAI's ChatGPT, Microsoft's Copilot, Google's Gemini, Anthropic's Claude, Perplexity, xAI's Grok, and DeepSeek.

Plaintiffs allege that from ChatGPT's consumer launch on November 30, 2022, through June 10, 2025, Microsoft's compute restraint artificially inflated prices and degraded product quality. The complaint cites market share data showing OpenAI commanded 82.65% of the Consumer Generative AI market as of July 2025, with the Herfindahl-Hirschman Index calculated at 6916.59, well above the 1800 threshold the Department of Justice uses to define highly concentrated markets.

The price effects allegedly became most stark after Chinese company DeepSeek AI entered the U.S. market in January 2025 with dramatically lower prices. The complaint alleges that while competitors reduced prices to meet DeepSeek's challenge, OpenAI's API pricing remained 136 to 200 times higher than competitors for equivalent models. One prominent AI developer, Theo Browne, was quoted in the complaint as noting: "OpenAI's new API is 200x more expensive than competition."

The DeepSeek entry and price war. DeepSeek's entry in January 2025 serves as a critical inflection point in the plaintiffs' narrative. The Chinese startup reportedly trained competitive models at approximately $6 million—a fraction of OpenAI's costs—and offered API access at rates up to 40 times cheaper than OpenAI's comparable models. This triggered an immediate price war among competitors with the computational flexibility to respond.

The complaint alleges that while Google, Anthropic, and other competitors cut prices dramatically, OpenAI remained constrained by its exclusive arrangement with Microsoft. During this period, OpenAI CEO Sam Altman publicly attributed product delays and feature limitations to GPU shortages, including postponing the rollout of ChatGPT 4.5 and limiting image generation capabilities.

June 2025 turning point. The complaint identifies June 10, 2025, as a watershed moment when Microsoft partially relaxed the compute exclusivity provision to allow OpenAI to purchase computing resources from Google. On that same day, OpenAI announced an 80% price reduction for its o3 model. The temporal coincidence of the exclusivity relaxation and price drop forms a central pillar of plaintiffs' causation argument.

Following access to Google's computing infrastructure, the complaint alleges OpenAI rapidly released new models and features that had been delayed, including ChatGPT 5, advanced image generation capabilities, and the Codex coding model. Plaintiffs characterize this acceleration as evidence that Microsoft's compute restraint had previously suppressed product development and quality.

However, the complaint notes that Microsoft's contractual right to restrict OpenAI's compute purchases remains in effect, creating what plaintiffs describe as a "sword of Damocles" that could be reimposed if market conditions change.

Legal Claims. The complaint asserts three causes of action: violation of Section 1 of the Sherman Act, violation of California's Cartwright Act, and violation of California's Unfair Competition Law. Plaintiffs seek certification of three overlapping classes:

• The Nationwide Damages Class encompasses all U.S. purchasers of ChatGPT subscriptions from November 30, 2022, through February 1, 2025. This period covers from ChatGPT's consumer launch until DeepSeek's market entry, when plaintiffs allege the compute restraint's effects were most pronounced due to high barriers to entry.

• The UCL Restitution Class extends the period through June 10, 2025, when Microsoft relaxed the exclusivity provision, covering the additional months when plaintiffs allege OpenAI's prices remained artificially inflated during the post-DeepSeek price war.

• The Nationwide Injunction Class runs from ChatGPT's launch to the present, reflecting plaintiffs' request for prospective relief to prevent future enforcement of the compute exclusivity provision.

The complaint advances both per se and rule of reason theories of liability. Under the per se theory, plaintiffs argue the exclusive compute agreement between horizontal competitors that directly restricts supply and output is presumptively unlawful without requiring elaborate market analysis. The complaint characterizes supply restrictions and price fixing as two sides of the same economic coin.

Under the alternative rule of reason analysis, plaintiffs allege Microsoft's conduct demonstrably harmed competition by inflating prices, restricting output, and limiting consumer choice, with no legitimate procompetitive justification. The complaint argues that Microsoft's 20% revenue share from OpenAI should have incentivized maximizing OpenAI's output and sales, making the compute restraint explicable only as an anticompetitive strategy to hobble a competitor while developing Microsoft's own CGAI products.

Barriers to entry. A substantial portion of the complaint details what plaintiffs term the "AI Computation Barrier to Entry" or AICBE. This barrier derives from the massive computational requirements for training large language models and processing inference requests at scale. Training cutting-edge models requires vast arrays of Nvidia GPUs, which are both expensive and scarce, with Nvidia holding approximately 88% market share in AI-optimized processors.

The complaint alleges training costs have grown exponentially, with Google's Gemini Ultra costing an estimated $191 million compared to just $900 for the original Transformer model in 2017. These costs create natural barriers that limited market entry to well-resourced firms with existing cloud computing infrastructure—specifically Microsoft, Google, and Amazon.

DeepSeek's January 2025 entry partially eroded this barrier through technical innovations that reduced training costs, and by open-sourcing its methods. However, the complaint maintains that significant computational requirements persist, and that switching costs and network effects continued to provide OpenAI with market power even after DeepSeek's entry—market power that Microsoft allegedly exploited through the compute restraint.

Requested relief. Plaintiffs seek treble damages under federal antitrust law for the overcharges paid by class members, plus restitution under California law. They also request that the court declare the exclusive compute provision unlawful and permanently enjoin its enforcement. The complaint also contemplates structural relief, including potential divestiture or segregation of Microsoft's Consumer Generative AI business lines to eliminate the conflict between Microsoft's roles as OpenAI's infrastructure provider and direct competitor.

The Case is No. 3:25-cv-08733.

Judge: NA.

Attorneys: Yavar Bathaee (Bathaee Dunne LLP) for Samuel Bryant.

Companies: Microsoft Corp.

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