Microsoft’s Partnership with OpenAI Faces Antitrust Scrutiny in the US and UK

Unravelling the OpenAI Boardroom Drama 

In a recent turn of events, Microsoft’s collaboration with OpenAI, the company behind ChatGPT, has come under the radar of antitrust regulators in both the US and the UK. This scrutiny follows a boardroom shakeup at OpenAI, involving the abrupt departure and return of CEO Sam Altman.

Microsoft, a significant supporter of OpenAI, has been granted a non-voting, observer position on the board following the tumultuous events of the past month. While this allows Microsoft’s representative to attend board meetings and access confidential information, they are restricted from participating in crucial decisions, including the election or selection of directors.

The specifics of who from Microsoft will hold the non-voting position and the composition of the final OpenAI board remain undisclosed at this time.

OpenAI’s parent company operates as a non-profit, a category typically exempt from antitrust scrutiny. However, in 2019, a for-profit subsidiary was established, with Microsoft reportedly owning a 49% stake, according to an insider. Contrary to this claim, a Microsoft spokesperson asserted on Friday that the details of their agreement were confidential, emphasizing that they do not “own any portion” of OpenAI and are entitled to a share of profits.

Credit: CNET

Microsoft has committed a substantial investment exceeding $10 billion in OpenAI, positioning itself at the forefront of the race for AI dominance alongside Alphabet’s Google.

The UK Competition and Markets Authority (CMA) issued a statement on Friday, acknowledging recent governance developments at OpenAI, some involving Microsoft. The CMA is contemplating whether to initiate an investigation into Microsoft’s investment to assess its potential impact on competition in the UK.

Simultaneously, the US Federal Trade Commission (FTC) is conducting a preliminary examination to determine if the investment might have breached antitrust laws. The inquiries are in their early stages, and the FTC has not formally launched an investigation as of now.

Responding to these developments, Microsoft President Brad Smith emphasized, “The only thing that has changed is that Microsoft will now have a non-voting observer on OpenAI’s board,” distinguishing this arrangement from Google’s acquisition of DeepMind in 2014.

Anticipating further regulatory actions, Max von Thun, Europe director at Open Markets Institute, urged antitrust authorities to act swiftly, emphasizing the need to investigate and potentially unwind deals to prevent monopolization of this crucial emerging technology.

European Union antitrust regulators are closely monitoring the situation, acknowledging the growing concentration in the AI sector. The UK’s CMA has invited interested parties, including Google, to submit comments on the review by January 3, 2024.

To initiate a comprehensive investigation, the CMA must demonstrate that the fallout from the Altman affair has resulted in substantial changes to OpenAI’s governance and Microsoft’s influence over its operations. Even if a full probe is not pursued, the preliminary investigation will contribute valuable insights to the CMA’s broader oversight of the rapidly evolving AI sector.

Microsoft’s recent encounters with the FTC and the CMA, particularly concerning the $69 billion acquisition of Activision Blizzard, underscore the increasing regulatory scrutiny faced by tech giants. The CMA initially blocked the Activision deal but later approved it after Microsoft modified its acquisition plan.

In the midst of these regulatory challenges, the tech industry watches closely as the future of Microsoft’s collaboration with OpenAI hangs in the balance.

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