OpenAI's warning shot shows the fragile state of EU regulatory dominance

On May 24, OpenAI, the company that created ChatGPT, announced that it may discontinue business in the European Union (EU). This announcement followed the European Parliament’s recent vote to adopt its new AI Act. In response to criticism from EU industry chief Thierry Breton, OpenAI CEO Sam Altman tweeted a day later that OpenAI has no plans to leave Europe. Yet the very threat of such a departure underscores the need for continued dialogue on AI regulations. As competition increases, regulatory collisions within this multi-trillion-dollar industry could be disastrous. A U.S.-EU misalignment could generate huge inefficiencies, duplicated efforts and opportunity costs. Most importantly, the mere possibility that OpenAI would depart could signal the demise or significant weakening of European regulatory primacy — something known as the “Brussels Effect” — given the company’s widespread influence and applications. The Brussels Effect highlights how the EU’s market forces alone are enough to incentivize multinational companies to voluntarily abide by its regulations and encourage other countries to adopt similar laws on their own. In recent years, however, the EU has implemented various interventionist policies that critics argue hinder innovation within and outside the region. One of these policies is the General Data Protection Regulation. Immediately after its enactment in May 2016, it prompted many data privacy law copycats worldwide, including within many U.S. states. However, many have argued its vague provisions and lack of guidance for companies looking to comply have rendered it ineffective. Another example is the EU’s Digital Markets Act (DMA), enacted…OpenAI's warning shot shows the fragile state of EU regulatory dominance