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Microsoft’s partnership with OpenAI, the creator of ChatGPT, is facing an antitrust probe in the US and the UK, as per media reports. This investigation comes in the wake of a recent boardroom conflict at OpenAI that resulted in the abrupt ouster and subsequent reinstatement of CEO Sam Altman.
Following the tumultuous events last month, Microsoft, a major supporter of OpenAI, was granted a non-voting observer position on the company’s new three-member initial board. In this capacity, Microsoft’s representative can attend OpenAI’s board meetings and access confidential information but cannot vote on crucial matters such as the election or selection of directors.
Microsoft has yet to reveal who will take the non-voting position and what a final OpenAI board would look like.
OpenAI’s parent is a non-profit entity, a category typically exempt from antitrust scrutiny. In 2019, it established a for-profit subsidiary, in which, according to an undisclosed source, Microsoft holds a 49% ownership stake. However, a Microsoft spokesperson contested this information on Friday, asserting that the details of their agreement were confidential. The spokesperson clarified that Microsoft does not “own any portion” of OpenAI but is entitled to a share of the profits.
The software giant has committed over $10 billion to OpenAI, positioning itself as a lead in the AI revenue race against Google’s Alphabet. There have recently been several developments in the governance of OpenAI, some of which involved Microsoft,” the UK Competition and Markets Authority (CMA) said on Friday. The CMA is considering whether to probe into Microsoft’s investment for potential impacts on UK competition.
Simultaneously, as reported by Bloomberg News, the US Federal Trade Commission (FTC) is conducting preliminary inquiries to determine if the investment may have breached antitrust laws. However, the FTC has not initiated a formal investigation at this point. Microsoft President Brad Smith said, “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 DeepMindin the UK,” he added, citing the deal by its main rival in 2014.
Given the increasing concentration in AI, Max von Thun, Europe director at the Open Markets Institute, a non-profit organization focused on strengthening antitrust law, suggests that other regulatory probes could follow. “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 monopolizing.”
European Union antitrust regulators state they are closely monitoring the control situation. The UK’s CMA has invited interested parties, including Google, to submit comments on the review by January 3, 2024.
To warrant further action, the CMA needs to find evidence that the fallout from the Altman affair has resulted in substantial changes to the governance of OpenAI and Microsoft’s influence over its affairs, said Alex Haffner, a competition lawyer and partner at Fladgate. Even if a full probe is not pursued, the preliminary investigation will enhance the CMA’s broader oversight of the rapidly evolving AI sector.
Having recently faced antitrust concerns over its $69 billion acquisition of Activision Blizzard, Microsoft has encountered challenges with the FTC and the CMA. The CMA initially blocked the Activision deal but later reversed its decision after Microsoft adjusted its acquisition plan.