Microsoft’s partnership with OpenAI, the company behind the popular ChatGPT AI-powered chatbot, has come under US and UK antitrust scrutiny, as per the British regulator and a media report.
This comes against a backdrop of a controversial ouster and return of CEO Sam Altman. After the reinstatement of Altman as CEO, a new three-member initial board gave OpenAI backer, Microsoft a non-voting, observer position at the American AI company.
As a result, Microsoft’s representative will be able to attend the company’s board meetings and even access confidential information. However, the Redmond-based tech giant hasn’t received the right to vote on electing directors.
Still, Microsoft is mum on who will take the non-voting position. It is worth noting that OpenAI’s parent is a non-profit company, and these entities are rarely subject to antitrust scrutiny.
In 2019, OpenAI set up a for-profit subsidiary, in which Microsoft owns a 49 per cent stake, according to a source. Last week, a Microsoft spokesperson disputed this report stating details of its agreement were confidential.
UK regulators scrutinize Microsoft’s investment in OpenAI. CMA’s concern triggers a review, distinguishing partnership vs. merger. #Microsoft #OpenAI #RegulatoryReview https://t.co/dB9nGRHt69
— LancingLight (@LancingLight) December 8, 2023
Moreover, the spokesperson clarified that Microsoft does not “own any portion” of OpenAI, Instead, it is just entitled to a share of profits. Notably, the software giant has invested over $10 billion into the startup to be at the forefront of the AI race.
“There have recently been a number of developments in the governance of OpenAI, some of which involved Microsoft,” the UK Competition and Markets Authority said on Friday.
The CMA Hasn’t Opened A Formal Probe Into Microsoft-OpenAI
It is still unclear whether the Competition and Markets Authority (CMA) will launch a probe into Microsoft’s investment to see if it could affect UK competition. Meanwhile, the US Federal Trade Commission (FTC) is reviewing whether the investment violated antitrust laws.
A Bloomberg News report claims these inquiries were preliminary and the agency hasn’t opened a formal investigation.
While the FTC declined to comment, Microsoft President Brad Smith released a statement saying that the only thing that has changed is that Microsoft will now have a non-voting observer on OpenAI’s board”.
“(That) is very different from an acquisition such as Google’s purchase of DeepMind in the UK,” Smith added, referring to the deal by Google in 2014.
Citing the growing concentration in AI, Europe director at Open Markets Institute Max von Thun suggests other regulatory probes could follow.
Microsoft President Sheds Light On OpenAI-Microsoft Partnership
“It is essential that antitrust authorities move quickly to investigate these deals, including unwinding them if necessary, to preserve competition and prevent this critical emerging technology from being monopolized.”
Aside from this, European Union antitrust regulators say they are following “very closely the situation of control”. Britain’s CMA has invited Google and other interested parties to comment on the review by January 3, 2024.
According to competition lawyer and partner at Fladgate Alex Haffner, the CMA will have to find evidence that shows Altman’s recent dismissal and rehiring has caused material changes in the governance of OpenAI and Microsoft’s influence over its affairs.
Haffner believes the preliminary investigation will better inform the CMA’s broader oversight of the AI sector, even if it decides not to pursue a full probe. To those unaware, Microsoft has recently locked horns with the FTC and the CMA over its $69 billion acquisition of Activision Blizzard citing antitrust concerns.
After initially blocking the Activision deal, the CMA changed its mind because Microsoft amended its acquisition plan.
