TheChek News Flow

How Chinese EV makers will respond to steep US tariffs

Manufacturers are likely to target expansion in Europe with luxury models that offer new features to consumers

Chinese electric cars were once largely synonymous with small, inexpensive vehicles. But in the past year, local EV makers have started repositioning themselves for the premium market.

The timing of a new 100 per cent duty by the US on imported Chinese EVs is thus unfortunate for those companies, hitting them just as they started going global with their high-end cars.

Not all companies will be affected equally by the tariffs. In the low end, the BYD Seagull electric hatchback, for example, with a price tag of around $9,600 in China, would still be considered price-competitive in most overseas markets even after a 100 per cent tariff. Less so for models like the Zeekr 009, the electric multipurpose vehicle starting at $69,700. Some manufacturers may decide US expansion is not worth the added costs. Others may find workarounds by setting up production facilities in countries like Mexico.

But one thing is for certain: winning over Europe has just become that much more important for the future of Chinese EV groups.

For these manufacturers, going the high-end route is now less a matter of choice than necessity to avoid getting caught up in a price war with BYD, China’s largest EV maker that is leading global growth in the lower price segment.

That strategy, which means contending with ​the brand power of European luxury-car makers, would have seemed a stretch not so long ago. But an unexpected change in consumer trends has driven stronger than expected sales of Chinese-made premium EVs in the past year.

In China, the definition of a luxury feature in an EV has been evolving rapidly. Branding, fancy car interiors and faster acceleration are some of the traditional attractions for consumers. Now other features are becoming more sought after, such as proprietary software and advanced battery and intelligent vehicle technologies.

Take Zeekr, the high-end electric car brand of Chinese carmaker Geely, which also owns a portfolio of global brands including Volvo and Lotus. Its popular Zeekr 001 electric sedan offers traditional high end features, such as accelerating from zero to 100kph in 3.8 seconds and car seats with back massage functions. 

But the bigger draw for many buyers has been the latest technology used in its intelligent cockpit, advanced radars, driving assistance system as well as a battery that charges in half an hour. A close relationship with China’s largest battery maker CATL, from which it received early funding, gives it a significant edge over rivals. Early access to the latest battery technology is key to staying ahead as EV makers search ceaselessly for longer range, lighter and cheaper batteries.

Demand for its high performance electric sports cars have been strong, with total sales doubling in the first quarter. But the problem is that while Zeekr sales surged by two-thirds last year, most so far have been in its home market. 

Despite China being the biggest auto market in the world, there is a limit as to how fast premium EV makers can grow at home. The nationwide per capita disposable income was Rmb39,218 ($5,415) last year, according to government data, with GDP per capita at $12,720. Tesla, which has been slashing prices in the country, remains a popular choice among locals.

For new growth — and to recoup steep development costs — EV makers have little option but to expand overseas. But the US, the largest auto market after China, looks challenging.

Government targets and mandates in the next largest market, Europe, offers some hope. In Germany the government aims to have at least 15mn EVs, including plug-in hybrids, on the road by 2030. The EU’s decision to ban new combustion engine cars sales from 2035 should also mean higher EV demand.

In Germany, EV sales fell by 16 per cent last year, according to data from the country’s automobile industry. That is partly to do with rising prices. While battery EV prices have more than halved in China over the eight years to 2023, average European prices have increased by €18,000. Meeting government targets on schedule will require a much wider range of affordable options, leaving a gap for Chinese EV makers to fill.

But even then it will not be easy. An ongoing investigation by the European Commission into subsidies given to EV makers in China could result in steep tariffs on Chinese imports in the near future. That leaves the EV makers a very small window to come up with a clear strategy for expansion in Europe.

Energy bills unlikely to fall in medium term, Ofgem warns

Regulator’s chief backs more ‘targeted support’ for households as renewable network expansion raises costs for consumers

British energy bills are not expected to fall substantially over the decade partly due to the costs of building out the electricity network to support the shift to renewables, the chair of the energy regulator has warned. 

Mark McAllister said in an interview with the Financial Times that Ofgem expects bills to be “relatively flat in the medium term”, adding that he backed more “targeted support” for households’ struggling with their energy bills. 

Speaking before the general election was called last week, McAllister, who took up his role at Ofgem in November, said: “As we build in more and more renewables, we’re also building in the price, amortised over many years, of the networks as well.  

“If we look at the forecasts for wholesale prices and then build on top of that the costs of the network going forward, I think we see something in our view that is relatively flat in the medium term,” he added.

The cost of energy is a key campaign issue ahead of the July 4 election, with both the ruling Conservative and opposition Labour parties promising to try to bring bills down.

Last week, Ofgem announced a 7 per cent fall from July in the price cap that governs most British household energy bills due to falling wholesale costs, meaning typical households would pay £1,568 per year.  

The cap will have fallen more than 60 per cent since peaking in January 2023 at the height of the energy crisis caused by surging wholesale energy costs, fuelling inflation and a cost of living crisis.

Nonetheless, it remains above pre-crisis levels typically below £1,100, partly due to the costs of running and developing electricity and gas cables and pipes, which will account for £363 or 25 per cent of the July 2024 cap, compared to £254 in the summer of 2021.  

The costs are inflation-linked, but will also factor in the investment needed to develop cables and pylons to cope with the rise of wind and solar farms, heat pumps and electric cars under the shift away from fossil fuels. 

National Grid recently said it would invest £31bn in electricity networks over the next five years. Chief executive John Pettigrew noted a “single-digit pound” impact on network costs on bills would be offset by the wholesale cost benefits of building renewables. 

McAllister has joined Ofgem at a crucial time, as the UK works towards its legally binding goal of net zero carbon emissions by 2050. The regulator has a mandate to support the government in meeting this goal, on top of its core role of protecting consumers.

Ofgem needs to enable huge investment to overhaul the energy system, with McAllister stressing the benefits of developing “power that’s generated locally and we’ve got full control over” in the form of renewables.

“Not getting to net zero is not in the interest of consumers,” McAllister added. “The interests of consumers are not just prices. It’s prices, energy security, net zero. All three of them are needed to protect the population of this country.”

McAllister, who has worked in the oil and gas industry, has joined Ofgem as it tries to restore its reputation following criticism that it was too slow to act after 30 suppliers collapsed during the energy crisis.

He said he thought Ofgem’s measures to toughen oversight struck the right balance. But, he added, suppliers’ customer service was “not as good as it really ought to be” and the regulator needed to “sharpen up our enforcement timetable”.  

He said that the price cap introduced in 2019, which imposes a limit on the unit rate of energy in default tariffs, had “done some good things in the past” but may not be the best mechanism for the future energy system.

“Expanding targeted support for consumers has got to be part of the solution,” he added.

McAllister, former head of the Office for Nuclear Regulation, also warned of “a challenge towards the end of the decade” over electricity supply given the closure of ageing nuclear power stations and the delay to the Hinkley Point C plant being built in Somerset by the French state utility EDF.

“We’ve got to get new renewables built and get other sufficient capacity on to the system in terms of storage. So, yes, there is a challenge for us there,” he said.

But he added: “We kept the lights on through the energy crisis; we will keep the lights on through this.”

People desire homes but financing conditions are stunting demand and supply

In the years leading up to the financial crisis, high house prices spurred a building boom and a glut of ultimately unwanted homes in peripheral European countries.

Spanish house prices have only just recovered to those levels today. As the available housing stock dwindles, undersupply is becoming the new problem. The country recorded a shortfall of about 350,000 homes last year. A familiar European story is playing out in Spain: people desire homes but financing conditions are stunting both demand and supply.

Property developers in Spain are in a rut. House prices are holding up but it is volumes that count. Transactions for new homes fell by a tenth last year. New permits are stagnant and completions are falling too. Lower construction activity explains why prices for new homes are rising about twice as fast as those for existing ones. These fundamentals point to something almost unthinkable for two decades: an opportunity in the Spanish housing market.

Shares in Spain’s listed builders such as Neinor Homes, Metrovacesa and Aedas Homes have all been stuck below book value for years. Lack of investor interest is hampering efforts both to develop new homes and build businesses with sustainable costs of capital.

The market’s disregard for the sector means that models are being tweaked to prioritise cash flows and shareholder returns. Metrovacesa has already returned more than 40 per cent of its market cap in dividends since 2019, funded through profits and land bank optimisation. It is still offering an expected yield of 10 per cent this year.

Neinor Homes began a similar journey last year with the decision to sell off its build-to-rent division and return cash to shareholders. Expected dividends this year of €200mn are equal to a forward yield of 25 per cent. A further €150mn is expected in 2025.

Builders need to be ready for an expected pick-up in demand this year as interest rates fall and government-sponsored mortgage support kicks in. Pre-sales at Metrovacesa were a fifth higher in the first quarter.

Unable to raise equity, Neinor Homes is bulking up its own pipeline with joint ventures, contributing €300mn from its disposal plan towards three partnerships last year. Necessity aside, it hopes that investors will look more favourably at a capital-light approach and the higher returns on capital it expects to generate.

Shares in all three are up by a tenth in the past month, spurred on by a dovish outlook from the central bank. Hacienda-sized yields and 20 per cent discounts to book value suggest there is more to come.

The Japanese automaker will make smaller engines compatible with various fuels that produce net zero CO2 emissions

Toyota 7203 -0.29%decrease; red down pointing triangle Motor plans to develop new engines tailored to electrification as part of efforts to cut carbon emissions.

The Japanese automaker said Tuesday that it will make smaller engines compatible with various fuels that produce net zero CO2 emissions to decarbonize internal-combustion engines.

Toyota has been taking what it calls a multipathway approach, which means offering consumers a variety of vehicles, including hybrid-electric and hydrogen-powered cars, in addition to electric vehicles.

In recent months, the carmaker has benefited from a shift among consumers in the U.S. and some other markets to gasoline-electric hybrid vehicles from fully electric vehicles, as more car buyers are worried about charging problems and higher prices associated with pure EVs.

Suitors for two listed corporate names must make firm offers or walk away on Wednesday

Bids for two of the UK’s biggest corporate names face a key deadline this week, with Royal Mail’s owner and Anglo American both edging closer to being sold as overseas bidders vie for relatively cheap British companies.

UK regulations set a deadline for bidders to make a firm offer or walk away. For both companies, this latest milestone is the end of the day on Wednesday. Czech billionaire Daniel Křetínský is in talks to acquire Royal Mail owner International Distribution Services in a £5bn deal, while Australian mining group BHP is attempting to seal a £39bn takeover of Anglo American. The offer date can be extended only at the request of the target company.

The double deadline highlights the flurry of recent takeover activity in the UK, as foreign bidders seize on discounted stock market valuations to snap up assets at bargain prices. M&A involving listed British companies is at its highest level by value since 2018, according to Dealogic, while IPOs have been scarce, leading to a decline in the number of public companies. That trend is not expected to abate, even with the uncertainty of July’s general election. 

“There are still so many high quality global companies listed in the UK and the valuation gap to the US — even with the market going up — is still enormous,” said Philip Noblet, head of UK & Ireland Investment Banking at Jefferies, who expects more takeovers over the coming months. “If anything the pace is increasing because there are concerns on the buy-side that the market is going to start to correct.”

Only last week, UK retail investment platform Hargreaves Lansdown said it had rejected a nearly £5bn takeover approach from a group of private equity firms including CVC.

Sian Evans, Citi’s head of UK M&A, said she felt that M&A activity was “near as high as I’ve seen it” while Kate Cooper, an M&A partner at law firm Freshfields, noted what she called an “amazing confluence at the moment of a lot of strategic bidders . . . Boards are finding their appetites back after a period of less certainty.”

Both Křetínský’s EP Group and BHP have hurdles to clear in order to execute the deals.

The board of IDS has said it was “minded to recommend” the offer from EP Group, but talks are ongoing, postal worker unions have raised concerns, and the UK’s general election on July 4 adds an extra dimension.

The Labour party, which is far ahead in opinion polls, has promised to “safeguard” the Royal Mail and has sought confirmation from Křetínský that the business would continue to be run from the UK.

Meanwhile, BHP’s pursuit of Anglo American faces several challenges. Anglo has already rejected three offers and both sides would have to agree on the structure. BHP wants Anglo to spin off two South African units as a condition of any deal.

Politics is also a feature of this deal: BHP’s proposed structure has prompted consternation among some of South Africa’s politicians, while Wednesday’s bid deadline coincides with the country’s general election.

If both bids succeed, the FTSE 350 could lose two more companies. UK chancellor Jeremy Hunt told the Financial Times last month that companies leaving the stock market “shouldn’t worry us at all” and was “part of how capitalism works”.

But the government has been trying to reform stock market and pensions rules in an effort to arrest the decline in the number of UK listings, a strategy the Labour opposition has broadly backed.

Dealmakers said that Labour’s extensive outreach to business should mitigate some uncertainty around the election result.

“We’re cautiously optimistic that this momentum of dealmaking will continue for the rest of the year,” said Richard Butterwick, a senior M&A lawyer at Latham & Watkins. “There will be increased scrutiny of the Labour policies that are emerging, and how those could generate gradual M&A focus in certain sectors.”

AI startup raises $6 billion, following earlier investments from Musk and X

xAI said it raised $6 billion in its latest fundraising round, as the OpenAI rival looks to invest more in research and development amid fierce competition in the burgeoning sector.

The funding round brings the valuation of the year-old startup to $24 billion, including the newly raised funds, making it the second-most valuable AI startup outside of OpenAI.

The money will be used to take “xAI’s first products to market, build advanced infrastructure and accelerate research and development of future technologies,” xAI said.

The round is double the initial target set by Musk’s team. Investors had been talking about raising $3 billion at an $18 billion valuation, including the new cash, The Wall Street Journal reported last month. Musk’s team raised the target in light of strong demand, according to people familiar with the matter.

Investors in the round include brand-name Silicon Valley firms such as Sequoia Capital and Andreessen Horowitz as well as Valor Equity Partners, Vy Capital, Fidelity Management & Research, and Saudi Prince al-Waleed bin Talal and Kingdom Holding, xAI said on its website late Sunday.

The latest round brings xAI’s fundraising total to at least $7 billion. Musk had personally invested $750 million into the startup, while his social-media company X contributed $250 million in the form of computing resources, some of the people said.

Musk tweeted in November that X investors will own 25% of xAI.

The total begins to rival OpenAI, which received $10 billion in committed funding from Microsoft last year, and Anthropic, another major AI startup that raised more than $6 billion last year. OpenAI is valued by investors at $86 billion, and Anthropic at $18 billion.

With xAI, Musk has been playing catch-up with his more well-funded rivals. He launched xAI publicly in July last year, making some investors skeptical that it has enough time to compete with other leading AI firms.

The startup released its chatbot, Grok, in November and made it available to subscribers on his social-media platform, X. xAI introduced its latest AI model, called Grok-1.5, earlier this year.

Musk said on X Sunday that his AI startup was valued at $18 billion before the new cash.

Musk, who runs other startups in addition to Tesla and SpaceX, has maintained loyalty among some investors despite recent turbulence in parts of his business empire.

Shares in Tesla have fallen more than 50% from its peak in November 2021, and the valuation of X has declined by more than half since he bought it in late 2022.

One selling point for xAI, according to its investors, is Musk’s other businesses, which collect valuable data that could be used to train the startup’s AI models and give it a leg up over competitors.

Musk is using X data to train Grok, which is delivering news summaries for the Stories feature on X. In the future, Musk could also use visual data from Tesla cars for model training and integrate xAI’s technology into Tesla’s Optimus humanoid robot, investors say.

Musk has talked publicly about both the need for massive amounts of data to train models and the amount of data that Tesla collects.

“The two sources of unlimited data are synthetic data and real world video,” he said during an interview on X Spaces last month. “Tesla has a pretty big advantage in real-world video.”

Last year, Musk also partnered with the cloud giant Oracle, whose data centers house the computing chips used to train Grok. Oracle founder Larry Ellison is a friend of Musk’s and has been involved for some time in helping Musk secure the computing resources needed to kick-start xAI.

A data protection taskforce that’s spent over a year considering how the European Union’s data protection rulebook applies to OpenAI’s viral chatbot, ChatGPT, reported preliminary conclusions Friday. The top-line takeaway is that the working group of privacy enforcers remains undecided on crux legal issues, such as the lawfulness and fairness of OpenAI’s processing.

The issue is important as penalties for confirmed violations of the bloc’s privacy regime can reach up to 4% of global annual turnover. Watchdogs can also order non-compliant processing to stop. So — in theory — OpenAI is facing considerable regulatory risk in the region at a time when dedicated laws for AI are thin on the ground (and, even in the EU’s case, years away from being fully operational).

But without clarity from EU data protection enforcers on how current data protection laws apply to ChatGPT, it’s a safe bet that OpenAI will feel empowered to continue business as usual — despite the existence of a growing number of complaints its technology violates various aspects of the bloc’s General Data Protection Regulation (GDPR).

For example, this investigation from Poland’s data protection authority (DPA) was opened following a complaint about the chatbot making up information about an individual and refusing to correct the errors. A similar complaint was recently lodged in Austria.

Lots of GDPR complaints, a lot less enforcement

On paper, the GDPR applies whenever personal data is collected and processed — something large language models (LLMs) like OpenAI’s GPT, the AI model behind ChatGPT, are demonstrably doing at vast scale when they scrape data off the public internet to train their models, including by syphoning people’s posts off social media platforms.

The EU regulation also empowers DPAs to order any non-compliant processing to stop. This could be a very powerful lever for shaping how the AI giant behind ChatGPT can operate in the region if GDPR enforcers choose to pull it.

Indeed, we saw a glimpse of this last year when Italy’s privacy watchdog hit OpenAI with a temporary ban on processing the data of local users of ChatGPT. The action, taken using emergency powers contained in the GDPR, led to the AI giant briefly shutting down the service in the country.

ChatGPT only resumed in Italy after OpenAI made changes to the information and controls it provides to users in response to a list of demands by the DPA. But the Italian investigation into the chatbot, including crux issues like the legal basis OpenAI claims for processing people’s data to train its AI models in the first place, continues. So the tool remains under a legal cloud in the EU.

Under the GDPR, any entity that wants to process data about people must have a legal basis for the operation. The regulation sets out six possible bases — though most are not available in OpenAI’s context. And the Italian DPA already instructed the AI giant it cannot rely on claiming a contractual necessity to process people’s data to train its AIs — leaving it with just two possible legal bases: either consent (i.e. asking users for permission to use their data); or a wide-ranging basis called legitimate interests (LI), which demands a balancing test and requires the controller to allow users to object to the processing.

Since Italy’s intervention, OpenAI appears to have switched to claiming it has a LI for processing personal data used for model training. However, in January, the DPA’s draft decision on its investigation found OpenAI had violated the GDPR. Although no details of the draft findings were published so we have yet to see the authority’s full assessment on the legal basis point. A final decision on the complaint remains pending.

A precision ‘fix’ for ChatGPT’s lawfulness?

The taskforce’s report discusses this knotty lawfulness issue, pointing out ChatGPT needs a valid legal basis for all stages of personal data processing — including collection of training data; pre-processing of the data (such as filtering); training itself; prompts and ChatGPT outputs; and any training on ChatGPT prompts.

The first three of the listed stages carry what the taskforce couches as “peculiar risks” for people’s fundamental rights — with the report highlighting how the scale and automation of web scraping can lead to large volumes of personal data being ingested, covering many aspects of people’s lives. It also notes scraped data may include the most sensitive types of personal data (which the GDPR refers to as “special category data”), such as health info, sexuality, political views etc, which requires an even higher legal bar for processing than general personal data.

On special category data, the taskforce also asserts that just because it’s public does not mean it can be considered to have been made “manifestly” public — which would trigger an exemption from the GDPR requirement for explicit consent to process this type of data. (“In order to rely on the exception laid down in Article 9(2)(e) GDPR, it is important to ascertain whether the data subject had intended, explicitly and by a clear affirmative action, to make the personal data in question accessible to the general public,” it writes on this.)

To rely on LI as its legal basis in general, OpenAI needs to demonstrate it needs to process the data; the processing should also be limited to what is necessary for this need; and it must undertake a balancing test, weighing its legitimate interests in the processing against the rights and freedoms of the data subjects (i.e. people the data is about).

Here, the taskforce has another suggestion, writing that “adequate safeguards” — such as “technical measures”, defining “precise collection criteria” and/or blocking out certain data categories or sources (like social media profiles), to allow for less data to be collected in the first place to reduce impacts on individuals — could “change the balancing test in favor of the controller”, as it puts it.

This approach could force AI companies to take more care about how and what data they collect to limit privacy risks.

“Furthermore, measures should be in place to delete or anonymise personal data that has been collected via web scraping before the training stage,” the taskforce also suggests.

OpenAI is also seeking to rely on LI for processing ChatGPT users’ prompt data for model training. On this, the report emphasizes the need for users to be “clearly and demonstrably informed” such content may be used for training purposes — noting this is one of the factors that would be considered in the balancing test for LI.

It will be up to the individual DPAs assessing complaints to decide if the AI giant has fulfilled the requirements to actually be able to rely on LI. If it can’t, ChatGPT’s maker would be left with only one legal option in the EU: asking citizens for consent. And given how many people’s data is likely contained in training data-sets it’s unclear how workable that would be. (Deals the AI giant is fast cutting with news publishers to license their journalism, meanwhile, wouldn’t translate into a template for licensing European’s personal data as the law doesn’t allow people to sell their consent; consent must be freely given.)

Fairness & transparency aren’t optional

Elsewhere, on the GDPR’s fairness principle, the taskforce’s report stresses that privacy risk cannot be transferred to the user, such as by embedding a clause in T&Cs that “data subjects are responsible for their chat inputs”.

“OpenAI remains responsible for complying with the GDPR and should not argue that the input of certain personal data was prohibited in first place,” it adds.

On transparency obligations, the taskforce appears to accept OpenAI could make use of an exemption (GDPR Article 14(5)(b)) to notify individuals about data collected about them, given the scale of the web scraping involved in acquiring data-sets to train LLMs. But its report reiterates the “particular importance” of informing users their inputs may be used for training purposes.

The report also touches on the issue of ChatGPT ‘hallucinating’ (making information up), warning that the GDPR “principle of data accuracy must be complied with” — and emphasizing the need for OpenAI to therefore provide “proper information” on the “probabilistic output” of the chatbot and its “limited level of reliability”.

The taskforce also suggests OpenAI provides users with an “explicit reference” that generated text “may be biased or made up”.

On data subject rights, such as the right to rectification of personal data — which has been the focus of a number of GDPR complaints about ChatGPT — the report describes it as “imperative” people are able to easily exercise their rights. It also observes limitations in OpenAI’s current approach, including the fact it does not let users have incorrect personal information generated about them corrected, but only offers to block the generation.

However the taskforce does not offer clear guidance on how OpenAI can improve the “modalities” it offers users to exercise their data rights — it just makes a generic recommendation the company applies “appropriate measures designed to implement data protection principles in an effective manner” and “necessary safeguards” to meet the requirements of the GDPR and protect the rights of data subjects”. Which sounds a lot like ‘we don’t know how to fix this either’.

ChatGPT GDPR enforcement on ice?

The ChatGPT taskforce was set up, back in April 2023, on the heels of Italy’s headline-grabbing intervention on OpenAI, with the aim of streamlining enforcement of the bloc’s privacy rules on the nascent technology. The taskforce operates within a regulatory body called the European Data Protection Board (EDPB), which steers application of EU law in this area. Although it’s important to note DPAs remain independent and are competent to enforce the law on their own patch where GDPR enforcement is decentralized.

Despite the indelible independence of DPAs to enforce locally, there is clearly some nervousness/risk aversion among watchdogs about how to respond to a nascent tech like ChatGPT.

Earlier this year, when the Italian DPA announced its draft decision, it made a point of noting its proceeding would “take into account” the work of the EDPB taskforce. And there other signs watchdogs may be more inclined to wait for the working group to weigh in with a final report — maybe in another year’s time — before wading in with their own enforcements. So the taskforce’s mere existence may already be influencing GDPR enforcements on OpenAI’s chatbot by delaying decisions and putting investigations of complaints into the slow lane.

For example, in a recent interview in local media, Poland’s data protection authority suggested its investigation into OpenAI would need to wait for the taskforce to complete its work.

The watchdog did not respond when we asked whether it’s delaying enforcement because of the ChatGPT taskforce’s parallel workstream. While a spokesperson for the EDPB told us the taskforce’s work “does not prejudge the analysis that will be made by each DPA in their respective, ongoing investigations”. But they added: “While DPAs are competent to enforce, the EDPB has an important role to play in promoting cooperation between DPAs on enforcement.”

As it stands, there looks to be a considerable spectrum of views among DPAs on how urgently they should act on concerns about ChatGPT. So, while Italy’s watchdog made headlines for its swift interventions last year, Ireland’s (now former) data protection commissioner, Helen Dixon, told a Bloomberg conference in 2023 that DPAs shouldn’t rush to ban ChatGPT — arguing they needed to take time to figure out “how to regulate it properly”.

It is likely no accident that OpenAI moved to set up an EU operation in Ireland last fall. The move was quietly followed, in December, by a change to its T&Cs — naming its new Irish entity, OpenAI Ireland Limited, as the regional provider of services such as ChatGPT — setting up a structure whereby the AI giant was able to apply for Ireland’s Data Protection Commission (DPC) to become its lead supervisor for GDPR oversight.

This regulatory-risk-focused legal restructuring appears to have paid off for OpenAI as the EDPB ChatGPT taskforce’s report suggests the company was granted main establishment status as of February 15 this year — allowing it to take advantage of a mechanism in the GDPR called the One-Stop Shop (OSS), which means any cross border complaints arising since then will get funnelled via a lead DPA in the country of main establishment (i.e., in OpenAI’s case, Ireland).

While all this may sound pretty wonky it basically means the AI company can now dodge the risk of further decentralized GDPR enforcement — like we’ve seen in Italy and Poland — as it will be Ireland’s DPC that gets to take decisions on which complaints get investigated, how and when going forward.

The Irish watchdog has gained a reputation for taking a business-friendly approach to enforcing the GDPR on Big Tech. In other words, ‘Big AI’ may be next in line to benefit from Dublin’s largess in interpreting the bloc’s data protection rulebook.

OpenAI was contacted for a response to the EDPB taskforce’s preliminary report but at press time it had not responded.