Microsoft, the tech giant based in Redmond, Washington, is currently under the regulatory radar in the European Union, facing the possibility of a hefty fine amounting to up to 1% of its annual revenue. This looming penalty is contingent upon the company's response to a critical request for information by May 27th, under the jurisdiction of the EU’s Digital Services Act.

The focal point of concern revolves around Microsoft's Bing search engine and its associated generative artificial intelligence services. Specifically, there are apprehensions regarding potential risks linked to generative AI, encompassing phenomena such as 'hallucinations', deepfakes, and automated manipulations that could lead to misinformation, particularly concerning electoral processes.

The revelation of this potential fine surfaced through a disclosure posted on X.com on May 17th, ushering this issue into the public domain. The post underscored the necessity for Microsoft to furnish pertinent information regarding the risks associated with generative AI features integrated into Bing, notably 'Copilot in Bing' and 'Image Creator by Designer'.

The European Commission, in a blog entry labeled “Daily News”, elucidated that the initial request for information was dispatched on May 14th, highlighting specific concerns stemming from Bing's AI functionalities. Microsoft has been granted until May 27th to comply with this request, failing which, the EU authorities retain the prerogative to impose fines up to 1% of the company's total annual revenue, along with potential periodic penalties up to 5% of its average daily income.

While a 1% revenue fine may seem modest, given Microsoft's substantial financial stature, it could translate to a staggering sum, possibly exceeding two billion dollars. With the company’s reported revenue for 2023 standing at $211 billion and anticipated growth in 2024, the potential financial repercussion looms significantly.

It is imperative to note that these fines are contingent upon Microsoft's response and compliance with the EU’s request, and the company has not been found guilty of violating any EU laws as of yet, at least not specifically pertaining to this notice. This development serves as a public-facing indicator of the EU's scrutiny over tech companies and their adherence to regulations concerning AI-driven services.